Multi-Cap on WebNotes

How to select a multi-cap mutual fund

Tue, 19 May 2026 00:00:00 +0000

Multi-cap fund selection post-2020 SEBI restructure is a more aggressive cousin of flexi-cap. The forced 50% mid/small exposure raises both return potential and drawdown risk.

Conflict-of-interest disclosure. This guide is published by WebNotes Editorial Team for informational purposes. WebNotes has no commercial relationship with any AMC or platform. No affiliate commission is earned.

Market-risk disclaimer. Mutual fund investments are subject to market risks. Past performance is not indicative of future returns. Multi-cap drawdowns of 40-50% are normal.

Multi-cap reclassification (2020)

Tue, 19 May 2026 00:00:00 +0000

In September 2020, SEBI mandated that multi-cap mutual fund schemes hold at least 25% in each of large-cap, mid-cap, and small-cap segments, restructuring the multi-cap category that had previously allowed AMCs greater discretion in market-cap allocation. The mandate caused significant industry consternation, AMC scheme reshuffling, and the eventual creation of the Flexicap category (which gave back the discretion that multi-cap had lost).

For Indian retail investors holding multi-cap funds in 2020, the mandate represented a significant change in scheme behaviour: many “multi-cap” funds had historically been large-cap-heavy in practice, and the new mandate forced them to invest at least 25% in small-caps, which represented a much riskier portfolio profile.

Multi-cap vs Flexicap: comparative analysis

Tue, 19 May 2026 00:00:00 +0000

Multi-cap and Flexicap are two SEBI-defined equity mutual fund categories that emerged from the 2020 multi-cap reclassification . The two categories sound similar but operate under different rules:

Multi-cap: Minimum 25% in each of large-cap, mid-cap, and small-cap stocks (the 25-25-25 rule). Remaining 25% at manager discretion.
Flexicap: 65% minimum total equity allocation; no mandatory split across cap segments. AMC has full discretion.

The reform sequence: SEBI’s September 2020 multi-cap mandate forced existing “multi-cap” funds to hold meaningful small-cap exposure; in response, SEBI created the Flexicap category to preserve AMC discretion. Most schemes that were previously “multi-cap” migrated to Flexicap, with multi-cap becoming a more constrained category.