What are Multi Cap Funds?

A multi-cap fund is a type of equity mutual fund that invests at least 25% each in large-cap (top 100 by market cap), mid-cap (next 101-250 companies), and small-cap companies (beyond 251^st company) respectively. It helps investors with diversification and flexibility by combining different market segments into one portfolio. Multi-cap funds allow investors to benefit from the growth of companies across all market caps—large, mid, and small.

 The balance amount is left to the fund manager’s discretion, allowing them to allocate based on opportunities in the market.

Pros & Cons of Multi Cap Funds

Pros

• Diversification Benefits: By investing across large, mid, and small-cap companies, multi-cap funds reduce concentration risk and provide opportunities for long-term capital growth.
• Different Market Conditions: The mix of stability from large-caps and growth from smaller companies helps them navigate different market cycles.
• High-Growth Opportunities: Small- and mid-cap stocks often outperform in bull markets, and multi-cap funds allow investors to participate in that growth.

Cons

• Market volatility: Exposure across all market caps makes them vulnerable to overall market downturns.
• Portfolio Restrictions: The SEBI mandate of minimum 25% in each category may force investment in certain segments even when conditions are unfavourable.

Tax Implications for Multi Cap Funds

Understanding taxation is essential to optimizing returns. Here’s how Multi Cap Funds are taxed:

• Short-Term Capital Gains (STCG): If units are sold within one year, the gains are classified as short-term and taxed at 20%.

• Long-Term Capital Gains (LTCG): Units held for more than one year are taxed at 12.5%. Gains up to ₹1.25 lakh per financial year are exempt.

Multi Cap Fund – Industry Snapshot

There are 31 Multi Cap Funds in total, and Nippon India Multi Cap Fund(G) leads with the highest AUM of ₹46,216 crores, while the overall category AUM is ₹2,05,016 crores.

The table below shows the average CAGR returns of the schemes and their respective benchmarks across different durations.

Note: The table above shows the average CAGR returns of the multi-cap category and its benchmark across all durations (as of 18th September 2025).

Multi-Cap Funds: Average Market Cap Allocation (%)

Note: The table above shows the average market-cap allocation of all multi-cap funds (as on 30th August 2025).

Insight: Market Cap Tilt in Multi Cap Funds

Within the 31 funds, allocation to large-cap, mid-cap, and small-cap stocks varies significantly by strategy:

• Large-Cap Tilt: Edelweiss Multi Cap Fund-Reg(G) allocates 47.2% to large-caps, giving stability and lower volatility, while Samco Multi Cap Fund-Reg(G) has the lowest at 24.6%.

• Mid-Cap Tilt: Motilal Oswal Multi Cap Fund-Reg(G) has the highest mid-cap allocation at 42.3%, compared to Samco Multi Cap Fund-Reg(G) at 13.6%.

• Small-Cap Tilt: DSP Multi Cap Fund-Reg(G) leads with 38.4% in small-caps, while Motilal Oswal Multi Cap Fund-Reg(G) is lowest at 22.3%.

Multi-Cap Portfolio overlap

Note: The above data is as on 30th Aug 2025.

• Canara Robeco Multi Cap Regular Growth, Edelweiss Multi Cap Regular Growth, and Union Multi Cap Regular Growth have more than 50% portfolio overlap with Axis Multi Cap Regular Growth.

• Union Multi Cap Regular Growth has more than 50% portfolio overlap with Edelweiss Multi Cap Regular Growth and TRUSTMF Multi Cap Regular Growth.

  Who should invest in multi-cap funds?

• Long-term investors (5+ years) to ride out volatility.

• Moderate risk-takers comfortable with fluctuations.

• Those seeking diversification—one fund covers all market caps.

• Balance seekers—large-caps provide stability; mid & small-caps offer growth.

• New investors wanting simple, diversified equity exposure.

Conclusion

Multi-cap funds offer a balanced approach to equity investing by blending the stability of large-cap stocks with the growth potential of mid- and small-caps. With SEBI’s allocation mandate and professional fund management, they provide diversification, adaptability, and long-term wealth creation potential.

However, investors must weigh inherent risks—particularly volatility in mid- and small-caps—and align choices with their goals, time horizon, and risk tolerance. For those seeking a professionally managed, all-in-one equity solution, multi-cap funds can be a strong addition to a long-term portfolio.