AUM size classification of mutual funds in India
AUM size classification in Indian mutual funds refers to the categorisation of equity mutual fund schemes based on the market capitalisation range of the stocks they are mandated to invest in, as defined by SEBI’s October 2017 scheme categorisation circular. The terms “large-cap,” “mid-cap,” and “small-cap” refer to the capitalisation of the portfolio’s underlying securities, not the fund’s own assets under management.
The AUM-based classification of fund schemes (by their own AUM size) is a separate concept, used for TER slab determination and industry concentration analysis.
SEBI’s 2017 category rationalisation
SEBI circular SEBI/HO/IMD/DF3/CIR/P/2017/114 dated 6 October 2017 introduced mandatory scheme categorisation for equity mutual funds. Prior to this, AMCs offered hundreds of schemes with arbitrary and overlapping mandates, making peer comparison impossible. The circular established uniform definitions:
Market capitalisation buckets
| Bucket | Definition | Approximate count (2024–25) |
|---|---|---|
| Large-cap | 1st to 100th company by full market capitalisation | Top 100 companies |
| Mid-cap | 101st to 250th company | Next 150 companies |
| Small-cap | 251st company onwards | Remaining listed companies |
AMFI publishes the list of companies in each bucket twice a year (in January and July), based on a six-month average of full market capitalisation. This “AMFI categorisation list” is mandatory for all AMCs, they must align their scheme portfolios with it within a rolling window.
Mandatory equity scheme categories and investment limits
| SEBI category | Minimum equity allocation | Market cap requirement |
|---|---|---|
| Large-cap fund | 80% in equity | ≥80% in top-100 (large-cap) stocks |
| Mid-cap fund | 65% in equity | ≥65% in 101–250 (mid-cap) stocks |
| Small-cap fund | 65% in equity | ≥65% in 251st onwards (small-cap) stocks |
| Large and mid-cap fund | 35% large + 35% mid | ≥35% large-cap + ≥35% mid-cap |
| Multi-cap fund | 75% in equity | ≥25% each in large, mid, and small-cap |
| Flexi-cap fund | 65% in equity | No constraint on market cap distribution |
| ELSS | 80% in equity | No market cap restriction |
The multi-cap fund category (introduced by SEBI in September 2020) mandated at least 25 per cent each in large, mid, and small-cap, forcing diversification. This was a significant regulatory intervention that changed the portfolios of many erstwhile “diversified equity” funds.
Fund’s own AUM and the TER slab
The fund’s own AUM (total assets under management across all plans) determines which TER slab under SEBI’s TER regulation the scheme falls into. As a fund’s AUM grows:
- It moves into higher AUM slabs with lower maximum TER allowances.
- Economies of scale in fund management (spreading fixed costs) typically allow AMCs to reduce TER.
- However, very large AUM in mid-cap or small-cap categories can create “overcrowding” problems, the fund cannot effectively exit positions without moving the market price.
The AUM-capacity constraint for mid and small-cap funds
A mid-cap or small-cap fund with very large AUM faces diminishing returns to active management because:
- Large position sizes in illiquid stocks make entry and exit expensive (portfolio turnover ratio costs rise).
- The fund’s trades begin to move market prices, creating adverse price impact.
- The manager is forced to hold more stocks to deploy capital, diluting the portfolio’s high-conviction positions.
SEBI has flagged this issue and some AMCs have voluntarily suspended fresh SIP and lump sum flows into large small-cap funds when AUM exceeds their perceived capacity.
Top 30 vs beyond top 30 (B30) cities classification
Separate from the market cap classification, SEBI classifies investor locations into the “top 30 cities” (T30) and “beyond top 30 cities” (B30) for the purpose of the additional TER incentive. This is a distribution-incentive classification, not a fund-size classification.
Industry-level AUM distribution (2024–25)
As of early 2025, the Indian mutual fund industry’s total AUM exceeded ₹55 lakh crore:
| Category | Approximate share of industry AUM |
|---|---|
| Equity schemes (all types) | ~55% |
| Debt schemes | ~20% |
| Hybrid schemes | ~12% |
| Passive (index + ETF) | ~13% |
Within equity:
- Large-cap equity: ~18% of equity AUM
- Mid-cap equity: ~13%
- Small-cap equity: ~11%
- Flexi/multi-cap and others: ~58%
Fund house AUM concentration
India’s mutual fund industry has significant AUM concentration. The top 5 AMCs (SBI Mutual Fund, HDFC Mutual Fund, ICICI Prudential, Nippon India, Kotak) account for approximately 60–65 per cent of industry AUM. SEBI monitors AMC-level AUM for systemic risk and has occasionally expressed concern about single-AMC concentration in specific categories.
AMFI categorisation list: practical implications
The biannual AMFI list revision can shift stocks between categories (e.g., a rapidly growing company may move from mid-cap to large-cap). When this happens, funds mandated to hold a minimum percentage in a specific category must adjust their portfolios within six months of the AMFI list release, creating predictable trading activity in affected stocks.
See also
- Total expense ratio in mutual funds
- Portfolio turnover ratio
- Tracking error in index funds
- Alpha (Jensen’s alpha) in mutual funds
- Mutual fund lock-in periods
- Mutual fund
- SEBI
References
- SEBI circular SEBI/HO/IMD/DF3/CIR/P/2017/114 dated 6 October 2017, scheme categorisation.
- SEBI circular on multi-cap fund minimum allocation requirement, September 2020.
- AMFI, Biannual market capitalisation categorisation list, amfiindia.com.
- SEBI Annual Reports, Industry AUM and concentration data.
- AMFI monthly AUM data at amfiindia.com.