6B.4 Scheme categories and reading the documents

6B.4.1SEBI's category framework#

Categories SEBI's categorisation framework of October 2017 created uniform categories, each with an investment rule, and allowed one scheme per category per AMC (with exceptions for index funds, ETFs, FoFs and sectoral or thematic funds). For equity funds the size buckets are defined by AMFI's list of companies ranked by full market capitalisation: large-cap the 1st–100th company, mid-cap the 101st–250th, small-cap from the 251st, updated every six months¹. A large-cap fund must hold at least 80% in large-caps; a large-and-mid-cap fund at least 35% in each [S].

SEBI's circular of 26 Feb 2026 replaced the categorisation clause of the Master Circular². As reported:

• Schemes are grouped into equity, debt, hybrid, life-cycle and other schemes (index funds, ETFs and FoFs among the others); the number of categories was reported to rise from 36 to 40 (the exact count was not checked against the circular).
• Solution-oriented schemes (retirement and children's funds) were discontinued: no fresh subscriptions, with mergers into similar schemes.
• Life-cycle funds: open-ended schemes with a target maturity and a glide path from equity to debt, with target maturities of 5 to 30 years.
• Sectoral debt funds: at least 80% in AA+ and above debt of one sector.
• Index funds and ETFs must hold at least 95% in the index's securities; FoFs at least 95% in their underlying funds.
• Overlap: AMCs disclose category-wise portfolio overlap monthly, computed at the security level as the sum of the minimum weight of each common holding (the measure (6B.32) of 6B.13). Sectoral and thematic equity schemes must keep overlap with other equity schemes (except large-cap) at or below 50%, with three years to comply.
• Names must match the category and may not emphasise returns.

6B.4.2SIFs for larger tickets#

Specialized Investment Funds (SIFs) A SIF is a mutual fund product for larger tickets, introduced by SEBI's circular of 27 Feb 2025 (effective 1 Apr 2025) and now in Chapter IX of the 2026 Regulations. The minimum investment is ₹10 lakh across all of an AMC's SIF strategies, except for accredited investors (Regulation 49(1)) [V]. Strategies are long–short in equity, debt or hybrid form, and may take unhedged short positions through derivatives of up to 25% of net assets; only AMCs meeting track-record and size criteria (for example average AUM of at least ₹10,000 cr over three years) may launch them³. A SIF sits between a mutual fund and a portfolio management service: it is pooled, regulated as a mutual fund, and permitted strategies a normal scheme is not.

6B.4.3Documents and the factsheet#

The documents

• SID (scheme information document): the binding description of one scheme: objective, asset allocation table (minimum and maximum in each asset class), benchmark, fund manager, loads, the risk factors, and the plans and options.
• SAI (statement of additional information): the fund-house-level information common to all its schemes (sponsor, trustees, AMC, tax, legal).
• KIM (key information memorandum): the short version of the SID that must accompany every application form.
• Factsheet: monthly, per AMC, every scheme on a page or two.
• Monthly portfolio: every holding with its weight; the 2026 Regulations require portfolio statements to unitholders in the manner SEBI specifies (Regulation 70(3)) [V]; AMCs publish full portfolios monthly [S].
• Riskometer: a six-level label (low, low to moderate, moderate, moderately high, high, very high) computed from the portfolio, reviewed monthly; debt schemes also carry a potential risk class (PRC) matrix of interest-rate risk (by Macaulay duration) against credit risk (as commonly summarised from SEBI's circulars of 2020–21; not re-checked, verify).
• Benchmark: a scheme must compare itself with the total return index (TRI) of its benchmark, which reinvests dividends. Comparing a fund (which receives dividends) with a price index (which does not) flatters the fund by the dividend yield, about 1–1.5 points a year for Indian large-caps.

How to read a factsheet line, in order

1. Category and benchmark. Is the benchmark a TRI that matches the category? A flexi-cap fund benchmarked to a large-cap index has an easy target in years when mid-caps lead.
2. AUM. Large AUM in a small- or mid-cap fund is a capacity question (6B.7, Berk–Green).
3. TER for both plans, and the date of the last change.
4. Portfolio turnover (the costs outside the TER, 6B.3.3).
5. Returns for 1, 3, 5, 10 years and since inception, for the plan you hold, next to the benchmark TRI and an additional benchmark. Note the dates: a trailing return reflects its end points.
6. Risk statistics: standard deviation, beta, Sharpe ratio (6B.7), with the risk-free rate the AMC used.
7. Top holdings and sectors; compare the weights with the benchmark to gauge active share.
8. For debt funds: portfolio YTM, Macaulay and modified duration, average maturity, the rating mix, the PRC cell (6B.10).
9. Fund manager and tenure: past returns earned by a different manager tell you little.
10. Exit load.