A guide to SEBI's new categories of Mutual Funds | North Loop Official Blog
North Loop Logo
North Loop
28 Oct 2020

A guide to SEBI's new categories of Mutual Funds

thumbnail for A guide to SEBI's new categories of Mutual Funds
Credit: North Loop

SEBI or Securities and Exchange Board of India is a governing body of the securities and commodity market of India. Its major function is to cater to and protect the interests of investors while regulating the securities market. SEBI guidelines for mutual funds are the latest initiatives taken up to make the lives of investors easier.

Under the recent SEBI mutual fund regulations, the mutual funds schemes have been recategorized to bring about more uniformity. Diversification across various specific categories makes it easier for investors to go through and understand mutual fund schemes that are in-line with their financial plans and finalize their decision to invest in the same. The latest SEBI guidelines for mutual funds has mandated the renaming of existing schemes as well, to make it easier for investors to understand the level of risk involved in the same.

As per the revised SEBI mutual fund regulations, mutual fund schemes are divided into 36 categories.

SEBI mutual fund category- Mutual funds are divided into 5 primary categories-

  • Equity Funds- These are the type of mutual funds under which money is invested in equities and related instruments.

  • Debt Funds- These are the type of mutual funds under which money is invested in debt instruments.

  • Hybrid Funds- These are the type of mutual funds under which money is invested in equities and as well as debt instruments.

  • Solution-Oriented Funds- These type of funds include Retirement schemes and Children’s fund schemes.

  • Other Funds- These are the type of funds which include Index Funds/ETFs and Fund of Funds (FoFs).

1. Equity Funds- These are divided into 10 categories as per the revised SEBI mutual fund regulations. They are-

  • Multi-Cap Funds- Under Multi-Cap Funds, investments are made into companies across various market capitalizations to diversify the investment portfolio.

  • Large Cap Funds- Under Large Cap Funds, investments are made into top 100 stocks.

  • Large and Mid-Cap Funds- Under Large and Mid-Cap Funds, investments are made into top 250 stocks.

  • Mid Cap Funds- Under Mid Cap Funds, investments are made into the next 150 stocks.

  • Small-Cap Funds- Under small-cap funds, investments are made into stocks outside of the top 250 category.

  • ELSS (Equity Linked Savings Schemes)- These are long term funds that allow one to save tax under Section 80C.

  • Sector/Thematic Funds- These are funds within which investments are made in sector specific equity funds.

  • Value Fund/ Contra Fund- Under value funds, investments are made into equities that are selling for less at the moment but have high potential in the future.

  • Focused Fund- These are the type of funds wherein investments are made in specific industries/segments.

  • Dividend Yield Fund- These are the type of funds wherein investments are made into dividend paying shares.


2. Debt Funds- These are divided into 16 categories as per the revised SEBI guidelines for mutual funds. They are-

  • Overnight Funds- These are the types of funds wherein investments are made for up to just one week.

  • Liquid Funds- These are the types of funds wherein investments range between one week and one month.

  • Ultra Short Duration Funds- These are the types of funds wherein investments are made for between 2 months and four months.

  • Low Duration Funds- These are the types of funds wherein investments are made for between 3 months and nine months.

  • Money Market Funds- These are the type of funds where money is lent to companies for upto 1 year.

  • Short Duration Funds- These are the types of funds wherein investments are made for between 1 and 3 years.

  • Medium Duration Funds- These are the types of funds wherein investments are made for between 2 and 4 years.

  • Medium to Long Duration Funds- These are the types of funds wherein investments are made for between 3 and 5 years.

  • Long Duration Funds- These are the types of funds wherein investments are made for over 5 years.

  • Dynamic Bond Funds- These are the type of funds wherein fund managers capitalize on interest rate fluctuation to generate high returns, by altering the lending duration dynamically.

  • Corporate Bond Funds- These are the type of funds wherein money is lent to companies only with high credit rating.

  • Banking and PSU funds- These are the type of funds wherein money is lent to Banks and PSUs.

  • Gilt Funds- These are the type of funds wherein investments are made primarily into government securities.

  • Gilt fund with 10 year constant duration- These are the type of funds wherein investments are made passively into government securities.

  • Floater Funds- These are the type of funds wherein at least 65% of the money are invested into floating-rate bonds.


3. Hybrid Funds- These are divided into 6 categories as per the revised SEBI mutual fund regulations. They are-

  • Arbitrage Fund- These are the type of funds that earn returns by trading securities in different markets to capitalize on varying prices.

  • Dynamic Asset Allocation/Balanced Advantage- Under these funds, investments are made into a mix of stocks and other securities, however, the allocation keeps changing to capitalize on the market conditions to maximize returns.

  • Equity Savings Fund- These are the type of mutual funds wherein a maximum of 35% is invested in debt securities, with the remainder being invested in FD-like instruments.

  • Balanced Hybrid Fund/Aggressive Hybrid Fund- These are the type of mutual funds wherein a maximum of 50% is invested in stocks, with the remainder being invested in FD-like instruments.

  • Conservative Hybrid Fund- These are the type of mutual funds wherein a maximum of 35% is invested in stocks, with the remainder being invested in FD like instruments.

  • Multi-Asset Allocation- Under these funds, investments are made into multiple asset classes across equities, debts and other instruments.


4. Solution-Oriented Funds- These are divided into 2 categories-

  • Retirement Fund- Retirement Funds have a minimum lockin period of 5 years or till retirement, earlier of the two.

  • Children’s Fund- Children’s fund have a minimum lock-in period of 5 years or till the child turns 18, earlier of the two.


5. Other Schemes- These are divided into 2 categories-

  • Index Funds/ETFs- 95% of these funds are invested in the securities of a particular index.

  • Fund of Funds (Overseas Domestic)- 95% of the total assets are invested in the underlying fund.

Start investing for free with North Loop and get personalized recommendations

North Loop provides carefully handpicked mutual funds, offering round-up investing and an automated set of rules and goals. Sign up today!

Save money with

No-fee banking, investments, remittances & insurance for the global Indian

This publication is provided for general information purposes only and is not intended to cover every aspect of the topics with which it deals. It is not intended be advice. You must obtain professional advice before taking, or refraining from, any action on the basis of the content in this publication. The information in this publication does not constitute legal, tax, investment or other professional advice from North Loop or its affiliates. We make no representations, warranties or guarantees, whether express or implied, that the content in the publication is accurate, complete or up to date. All opinions expressed do not reflect the views of North Loop nor are endorsed by North Loop.