Equity on WebNotes

Active equity vs passive equity investing in India

Tue, 12 May 2026 00:00:00 +0000

The active-versus-passive debate in Indian equity investing examines whether actively managed equity mutual funds, where a fund manager selects stocks based on research and conviction, consistently deliver higher risk-adjusted returns than passively managed funds that simply replicate a market index at lower cost.

This article presents the empirical evidence, cost analysis, and structural arguments advanced for each approach in the Indian market context as of 2024.

Definitions

Active equity fund: A fund where a fund manager and research team construct a portfolio of stocks based on fundamental analysis, valuation, sector views, and risk assessments. The fund’s benchmark (e.g., Nifty 50 TRI, Nifty 500 TRI) serves as the reference; the manager aims to generate alpha (return above the benchmark). Cost is higher due to research staff, portfolio management fees, and higher transaction turnover.

Large-cap fund vs index fund in India

Tue, 12 May 2026 00:00:00 +0000

SEBI’s October 2017 categorisation circular mandated that large-cap equity mutual funds invest at least 80% of total assets in equity of large-cap companies, defined as the top 100 companies by full market capitalisation listed on NSE/BSE as per AMFI’s semi-annual ranking. Index funds tracking the Nifty 50 or Sensex invest in the same broad universe (top 50 or top 30 companies by market cap) but use a passive, rules-based replication strategy with no active stock selection.

Multi-cap fund vs flexi-cap fund in India

Tue, 12 May 2026 00:00:00 +0000

SEBI’s October 2017 categorisation circular originally created a single “Multi-cap” fund category requiring diversified equity investment across market capitalisations. In January 2021, SEBI split this into two distinct categories, multi-cap and flexi-cap, with materially different mandatory allocation constraints. This article explains the distinction between the two categories and their practical implications for investors.

SEBI definitions

Multi-cap fund

SEBI’s September 2020 circular (SEBI/HO/IMD/DF3/CIR/P/2020/130) redefined multi-cap funds. The mandatory allocation requirement is:

Mutual fund vs stock investing in India

Tue, 12 May 2026 00:00:00 +0000

Direct stock investing involves buying shares of individual companies listed on NSE or BSE through a stockbroker’s trading platform. A mutual fund is a pooled investment vehicle managed by a professional fund manager, investing the aggregated corpus across a portfolio of securities as specified in the scheme’s investment objective. Both instruments provide equity market exposure, but differ in how that exposure is structured, managed, and accessed.

Diversification

A direct equity investor who purchases shares in one or a few companies is concentrated in those specific businesses, sectors, and risks. Diversification requires purchasing multiple stocks, which demands larger capital at each share’s prevailing price.

Equity segment on Zerodha

Mon, 11 May 2026 00:00:00 +0000

The equity segment on Zerodha is the platform’s largest business line by client headcount and turnover. It covers the buying and selling of equity shares listed on the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) under the cash market (CM) segment. All trades in this segment are governed by the Securities and Exchange Board of India (SEBI) and cleared through NSE Clearing Limited (NCL) and Indian Clearing Corporation Limited (ICCL) for BSE. Settlement since January 2023 occurs on a T+1 basis for most listed equities, meaning shares and funds move between counterparties on the trading day plus one calendar day.