Flexi Cap Fund
An open-ended equity scheme that must keep at least 65 percent in equity and may move that money freely across large, mid and small cap stocks, with no fixed split.
In plain language
Most equity categories in SEBI's scheme list tell the fund manager where to invest: large caps, mid caps, small caps, or a fixed mix. A Flexi Cap Fund is the one that mostly does not.
The workbook's definition: an open-ended equity scheme where the minimum investment in equity and equity related assets is 65 percent of total assets. This would be a dynamic fund where there can be investment across large cap, mid cap as well as small cap stocks.
So the investor is buying the manager's judgement about which part of the market to be in — and when to change it.
How it works
The size bands it chooses between (SEBI's definitions, Box 2.2):
| Band | Companies by full market capitalisation |
|---|---|
| Large cap | 1st to 100th |
| Mid cap | 101st to 250th |
| Small cap | 251st onwards |
How it differs from its neighbours in the equity list.
| Category | Equity minimum | Size rule |
|---|---|---|
| Flexi Cap Fund | 65% | None — dynamic across all three |
| Multi Cap Fund | 75% | At least 25% each in large, mid and small cap (SEBI circular of 26 February 2026) |
| Large and Mid Cap Fund | — | At least 35% large cap and 35% mid cap |
| Large Cap / Mid Cap / Small Cap | 80% / 65% / 65% in that band | Single band |
The residual. In equity category schemes, a mutual fund may invest the residual portion in equity, money market and other liquid instruments, gold and silver instruments as permitted by SEBI, and InvITs, within the regulatory ceilings for each asset class.
One per fund house. An AMC can have only one scheme per category, so each mutual fund offers at most one flexi cap fund. The exceptions to that rule are index funds and ETFs on different indices, fund of funds with different underlying schemes, and sector and thematic funds.
A worked example
A flexi cap fund has Rs 2,000 crore of assets. Allocations are illustrative.
| Year 1 | Year 3 | |
|---|---|---|
| Large cap | 70% (Rs 1,400 cr) | 40% (Rs 800 cr) |
| Mid cap | 10% (Rs 200 cr) | 25% (Rs 500 cr) |
| Small cap | 5% (Rs 100 cr) | 20% (Rs 400 cr) |
| Total equity | 85% | 85% |
| Money market / other residual | 15% (Rs 300 cr) | 15% (Rs 300 cr) |
Both years are within the category: equity is above 65 percent, and there is no minimum for any size band. In year 1 the fund had only 5 percent in small caps — a Multi Cap Fund could not do that, because it must hold at least 25 percent in each band.
For Deepa, who put Rs 3,00,000 in during year 1, the consequence is that her risk changed without her doing anything: by year 3, 45 percent of her holding sat in mid and small caps — Rs 1,35,000 measured on her original Rs 3,00,000 — against 15 percent (Rs 45,000) when she invested. That is the flexibility she bought — and the reason a distributor must check the current portfolio, not just the category name.
Why NISM asks about it
Chapter 2.2.4 (Mutual fund scheme categorization and SEBI regulation) lists Flexi Cap as the 13th equity sub-category with its 65 percent equity minimum. Expect a match-the-category question against Multi Cap (75 percent, with 25 percent in each band) and Large and Mid Cap (35 plus 35), and a question on the large/mid/small cap cut-offs of 100 and 250. Chapter 4 also tells distributors to check which market segment a diversified equity fund is investing in.
Common exam traps
- Flexi Cap: 65 percent equity, no size split. Multi Cap: 75 percent equity, at least 25 percent in each of large, mid and small. These two are swapped more than any other pair.
- "Dynamic" means the size mix moves, not that the fund can drop below the 65 percent equity floor.
- Large cap is the top 100 by full market capitalisation, mid cap 101–250, small cap 251 onwards.
- One flexi cap fund per mutual fund — the one-scheme-per-category rule applies.
- SEBI's 65 percent category floor is not the income-tax test. The Income Tax Act treats a scheme as equity-oriented when more than 65 percent is in equity shares listed in India — a separate test applied to the actual portfolio.
Where this is taught
- Series V-A · Chapter 2: Concept & Role of a Mutual Fundintroduced here
- Series V-D · Chapter 2: Concept & Role of a Mutual Fundintroduced here
- Series V-B · Chapter 2: Concept and Role of a mutual fundintroduced here
Related terms
- Mutual fundA trust registered with SEBI that pools money from many investors and invests it in securities on their behalf — not a different product from shares and bonds, but a different way of owning them.
- Asset allocationThe decision on how to distribute a client's wealth across asset classes — the first decision in building a portfolio, and the one that explains most of what the portfolio then does.
- Actively managed fundA scheme whose fund manager chooses the portfolio within the broad limits of the investment objective, aiming to beat its benchmark — at a higher running cost than a passive fund.
- Equity-oriented fundA fund that puts at least 65% of its proceeds into listed domestic equity shares — the tax definition that unlocks the 12.5% long-term rate and the Rs 1,25,000 annual exemption.
- Multi Cap FundAn open-ended equity scheme investing across large, mid and small caps, with at least 75% of total assets in equity and at least 25% each in large-cap, mid-cap and small-cap companies.
- Diversified equity fundAn equity scheme that invests across a wide spectrum of companies drawn from several industries, so that no single company and no single industry can sink the portfolio.