Large-and-midcap mutual fund
A large-and-midcap mutual fund in India is an open-ended equity scheme that must invest a minimum of 35% of its total assets in large-cap stocks (top 100 companies by AMFI ranking) and a minimum of 35% in mid-cap stocks (101st to 250th companies by AMFI ranking), under SEBI’s October 2017 scheme categorisation circular. This dual minimum mandate creates a structurally blended exposure that provides the stability of large-cap companies alongside the higher growth potential of mid-cap companies.
Regulatory definition
SEBI circular SEBI/HO/IMD/DF3/CIR/P/2017/114 defined this category as:
- Scheme type: Open-ended equity scheme investing in both large-cap and mid-cap stocks.
- Minimum large-cap allocation: 35% of total assets.
- Minimum mid-cap allocation: 35% of total assets.
- Total minimum equity: 70% of total assets (35% large + 35% mid).
- Benchmark: Typically NIFTY LargeMidcap 250 TRI or S&P BSE LargeMidCap TRI.
The remaining 30% of assets may be in additional large-cap, mid-cap, small-cap stocks, or debt/money-market instruments.
Asset allocation rules
| Segment | Minimum |
|---|---|
| Large-cap (top 100 companies) | 35% |
| Mid-cap (101st to 250th companies) | 35% |
| Total equity (combined) | 70% |
| Residual (small-cap, debt, cash) | Up to 30% |
This structure guarantees investors at least a one-third allocation to each of the two major market-cap segments at all times.
Investment characteristics
The large-and-midcap category was carved out from the broader pre-2017 “large-cap” and “diversified equity” fund landscape to create a clearly defined blend. Its characteristics:
- Combines the defensive quality of established blue-chip companies (the large-cap sleeve) with the growth potential of emerging market leaders (the mid-cap sleeve).
- Less volatile than pure mid-cap funds but more growth-oriented than pure large-cap funds.
- The mandatory 35% mid-cap floor ensures that fund managers cannot hide a mid-cap-labelled fund in large-cap stocks during market downturns.
Benchmark
The NIFTY LargeMidcap 250 TRI is the standard benchmark. This index comprises 100 large-cap companies (NIFTY 100) and 150 mid-cap companies (NIFTY Midcap 150), with the large-cap component weighted by its higher market capitalisation. The index is maintained by NSE Indices Limited.
Risk profile
Large-and-midcap funds carry high risk:
- Higher volatility than pure large-cap funds due to the mandatory mid-cap exposure.
- Lower volatility than pure mid-cap funds because of the 35% large-cap floor.
- Drawdowns typically 25% to 40% peak-to-trough in severe bear markets.
Taxation
Large-and-midcap funds are equity-oriented (at least 70% in domestic listed equities) and taxed accordingly.
Capital gains (Finance Act 2024):
| Holding period | Tax rate |
|---|---|
| Less than 12 months (STCG) | 20% flat |
| 12 months or more (LTCG) | 12.5% on gains above ₹1.25 lakh per year |
Securities Transaction Tax applies on redemptions. The grandfathering rule for LTCG applies to pre-31 January 2018 units. See capital gains tax in India and ITR-2 for reporting.
Comparison with adjacent categories
Large-and-midcap versus large-cap fund
A large-cap fund must invest at least 80% in top-100 companies with minimal mid-cap exposure. Large-and-midcap mandates 35% in mid-cap, providing higher growth potential but more volatility.
Large-and-midcap versus mid-cap fund
A mid-cap fund mandates 65% in mid-cap companies and may have limited large-cap exposure. Large-and-midcap is less mid-cap concentrated and less volatile.
Large-and-midcap versus flexi-cap fund
A flexi-cap fund has no mandatory allocation to any segment. Fund managers may hold 80%+ large-cap if they choose. Large-and-midcap enforces the mid-cap floor irrespective of market conditions or the manager’s preference.
Large-and-midcap versus multi-cap fund
A multi-cap fund mandates 25% each in large-cap, mid-cap, and small-cap, adding a mandatory small-cap exposure not present in large-and-midcap.
Exemplar schemes
Well-known large-and-midcap funds include:
- Mirae Asset Large & Midcap Fund (Mirae Asset Mutual Fund)
- Canara Robeco Emerging Equities Fund (Canara Robeco Mutual Fund)
- HDFC Large and Mid Cap Fund (HDFC Mutual Fund)
- SBI Large and Midcap Fund (SBI Mutual Fund)
- Kotak Equity Opportunities Fund (Kotak Mahindra Mutual Fund)
- Axis Growth Opportunities Fund (Axis Mutual Fund)
- Invesco India Large and Mid Cap Fund (Invesco Mutual Fund)
- Nippon India Vision Fund (Nippon India Mutual Fund)
These are cited for reference only.
Suitability
Large-and-midcap funds are suitable for:
- Investors seeking a disciplined blend of large-cap stability and mid-cap growth without full mid-cap risk.
- Investors with a high risk tolerance and a 5-7+ year investment horizon.
- Investors who want structured large-cap and mid-cap diversification without the small-cap exposure of a multi-cap fund.
Regulatory oversight
Large-and-midcap funds are regulated by SEBI under the SEBI (Mutual Funds) Regulations, 1996. The mutual fund industry in India framework governs fund operations.
References
- SEBI Circular SEBI/HO/IMD/DF3/CIR/P/2017/114, “Categorisation and Rationalisation of Mutual Fund Schemes”, 6 October 2017.
- NSE Indices Limited, NIFTY LargeMidcap 250 Index Methodology.
- Finance Act 2024, Section 112A.