According to SEBI's categorization norms, what is the mandatory minimum allocation across market capitalizations for a Multi Cap Fund?

[ A ]Minimum 75% in total equity: exactly distributed as min 25% in Large Cap, min 25% in Mid Cap, and min 25% in Small Cap[ CORRECT ]

[ B ]Minimum 65% in total equity with full discretion to the fund manager across market caps

[ C ]Minimum 80% in large cap stocks and maximum 20% in debt securities

[ D ]Minimum 65% in mid cap stocks and 35% in small cap stocks

Takeaway

Option A is correct: Minimum 75% in total equity: exactly distributed as min 25% in Large Cap, min 25% in Mid Cap, and min 25% in Small Cap

Derivation

Under SEBI scheme categorization rules, a Multi Cap Fund is an open-ended equity scheme investing across large cap, mid cap, and small cap stocks. The scheme must maintain a minimum total equity investment of 75% of total assets, strictly distributed as: at least 25% in large cap companies (1st-100th by market cap), at least 25% in mid cap companies (101st-250th), and at least 25% in small cap companies (251st onwards). This tests the regulatory portfolio floor for multi-cap funds. A common trap is confusing Multi Cap with Flexi Cap (which requires 65% overall equity without cap-specific minimums).

Why the others fail

B — Minimum 65% in total equity with full discretion to the fund manager across market caps

A minimum 65% total equity allocation with complete fund manager flexibility across market caps defines a Flexi Cap Fund.

C — Minimum 80% in large cap stocks and maximum 20% in debt securities

A minimum 80% allocation in large cap stocks defines a Large Cap Fund, whereas Multi Cap requires 25% in each of the three segments.

D — Minimum 65% in mid cap stocks and 35% in small cap stocks

A minimum 65% allocation in mid cap stocks defines a Mid Cap Fund, while Small Cap Funds require 65% in small cap stocks.