SEBI multi-cap reclassification 2020

The SEBI multi-cap reclassification of 2020 was a two-step change to India’s equity mutual fund categories. SEBI circular SEBI/HO/IMD/DF3/CIR/P/2020/172, “Asset Allocation of Multi Cap Funds”, dated 11 September 2020, required every Multi Cap fund to hold at least 75 per cent in equity with at least 25 per cent each in large cap, mid cap and small cap stocks. SEBI circular SEBI/HO/IMD/DF3/CIR/P/2020/228, dated 6 November 2020, then created the Flexi Cap fund category with a 65 per cent equity floor and no market-cap minimum. Both circulars came from the SEBI Investment Management Department under the SEBI (Mutual Funds) Regulations 1996 .

Earlier versions of this page attributed the whole change to a single circular numbered 2020/236 of 6 November 2020 and described the 11 September 2020 document as a consultation paper. Both statements were wrong. The 11 September 2020 document is the binding circular 2020/172, and the Flexi Cap circular of 6 November 2020 is numbered 2020/228; SEBI’s Master Circular for Mutual Funds of 20 March 2026 cites both numbers in its footnotes to the equity category table.

The Multi Cap definition before September 2020

Under SEBI circular SEBI/HO/IMD/DF3/CIR/P/2017/114 of 6 October 2017, a Multi Cap fund needed a minimum of 65 per cent of total assets in equity and equity-related instruments and had no minimum in any market-cap segment. The 2017 categorisation framework defined large cap as the top 100 companies by full market capitalisation, mid cap as the 101st to 250th, and small cap as the 251st onwards, on a list AMFI maintains. With no segment floor, a Multi Cap fund could hold mostly large caps and still use the name.

Circular 2020/172 of 11 September 2020

Circular 2020/172 partially modified the Multi Cap row of the 2017 table. Its stated purpose was to diversify Multi Cap investments “across large, mid and small cap companies” and keep the schemes “true to their label”.

Table: Multi Cap fund scheme characteristics. Sources: SEBI circulars SEBI/HO/IMD/DF3/CIR/P/2017/114, 6 October 2017, and SEBI/HO/IMD/DF3/CIR/P/2020/172, 11 September 2020.

Paragraph 2.1 of the circular gave existing Multi Cap funds until one month after AMFI published its next market-cap list, which it dated to January 2021, to comply. The same rule stands today as item 1 of the equity table in paragraph 3.8.1 of the Master Circular for Mutual Funds dated 20 March 2026.

Circular 2020/228 of 6 November 2020 and the Flexi Cap category

Circular 2020/228 introduced Flexi Cap as a new equity category “to give more flexibility to the mutual funds”, on the recommendation of SEBI’s Mutual Fund Advisory Committee. A Flexi Cap fund needs a minimum of 65 per cent in equity and equity-related instruments and has no market-cap minimum, the same freedom the Multi Cap category had before 11 September 2020. The circular let AMCs launch Flexi Cap schemes from 6 November 2020 and allowed an existing scheme to convert through the fundamental-attribute change process in Regulation 18(15A) of the 1996 regulations, which gives unitholders an exit at NAV without exit load.

Each AMC may run one scheme per category (paragraph 3.10.1 of the 20 March 2026 Master Circular), so a fund house can run one Multi Cap fund and one Flexi Cap fund side by side.

How the Multi Cap category changed in AMFI data

AMFI’s monthly reports show most Multi Cap money moving to the new category rather than rebalancing into small caps. At 31 December 2020 there were 35 Multi Cap schemes with net assets of Rs 1,67,815.68 crore. AMFI’s January 2021 report notes that “During Jan 2021, 16 Multi Cap Funds were re-categorized as Flexi Cap Fund”. By 31 March 2021 Multi Cap had 10 schemes and Rs 19,891.29 crore, and Flexi Cap had 25 schemes and Rs 1,58,724.85 crore.

The Multi Cap category was rebuilt through new launches under the 25 per cent rule. AMFI’s September 2026 report shows 33 Multi Cap schemes with net assets of Rs 2,48,188.16 crore, against 47 Flexi Cap schemes with Rs 5,88,389.52 crore.

Table: Multi Cap and Flexi Cap schemes and net AUM. Source: AMFI monthly reports for the months shown.

Ongoing compliance for Multi Cap funds

A Multi Cap fund must keep each 25 per cent floor as stocks move between segments. AMFI updates the market-cap list every six months on data as of the end of June and the end of December, and a fund must rebalance within one month of each update, under paragraphs 3.9.2 and 3.9.3 of the 20 March 2026 Master Circular. A breach caused by market movement rather than by the AMC must be corrected within 30 business days, extendable by the investment committee by up to 60 business days, under paragraph 3.11.

See also

• Multi Cap mutual fund in India
• Flexi Cap mutual fund in India
• Multi-cap versus flexi-cap
• SEBI mutual fund categorisation, October 2017
• SEBI scheme rationalisation circular 2017
• AMFI market-cap classification list
• Mutual fund
• SEBI (Mutual Funds) Regulations 1996
• SEBI MF stress testing 2024
• SEBI Investment Management Department
• Riskometer framework (India)
• SEBI scheme merger and conversion rules
• Mutual fund industry in India
• Scheme Information Document

References

1. SEBI circular SEBI/HO/IMD/DF3/CIR/P/2020/172, “Asset Allocation of Multi Cap Funds”, 11 September 2020.
2. SEBI circular SEBI/HO/IMD/DF3/CIR/P/2020/228, “Introduction of ‘Flexi Cap Fund’ as a new category under Equity Schemes”, 6 November 2020.
3. SEBI circular SEBI/HO/IMD/DF3/CIR/P/2017/114, “Categorization and Rationalization of Mutual Fund Schemes”, 6 October 2017.
4. SEBI, Master Circular for Mutual Funds as on 20 March 2026, paras 3.8, 3.9 and 3.11.
5. AMFI monthly reports, December 2020, January 2021, March 2021 and September 2026.