Types of Mutual Funds in India: The Complete SEBI Categories

By Vinoth Kanna Published 18 August 2026 Updated 24 September 2026 15 min read Guides · Mutual Funds

Before October 2017, two schemes could carry near-identical names and hold quite different portfolios: one “balanced” fund held 65% equity, another 45%, and a fund house could run five large-cap-flavoured schemes hard to tell apart even after reading their documents. The types of mutual funds on the Indian shelf today are the direct result of SEBI ending that — defined groups, defined categories, and a stated boundary for what each may hold.

This guide walks that framework: the five groups, the categories inside them, what each owns, its risk and the horizon it is built around. It sits in Gale’s mutual funds hub; if fund structure is new, start with what a mutual fund is and keep the stock market terminology glossary open.

Why SEBI redrew the categories in 2017-18

The problem was sameness. By 2017 the industry ran a long list of schemes, many of them minor variations kept alive because a new fund offer sells more easily than an old one. Category names were marketing terms: “opportunities” and “prudence” meant whatever a scheme document said.

SEBI’s categorisation circular of 6 October 2017 imposed three rules that, in revised form, still govern the shelf:

Five groups with a fixed list of categories inside them — equity, debt, hybrid, solution-oriented and other, subdividing into roughly three dozen categories.
One scheme per category per fund house, excepting index funds and ETFs on different indices, fund of funds, and sectoral or thematic funds.
Uniform market-cap definitions — large cap is the top 100 listed companies by full market capitalisation, mid cap the 101st to 250th, small cap the 251st onward, from a list AMFI publishes twice a year.

Fund houses then merged and re-mandated schemes through 2018.

SEBI rewrote the framework in a circular of 26 February 2026 and folded it, with changes, into its master circular for mutual funds of 20 March 2026. The architecture survived — five groups, a fixed list of categories, one scheme per category per fund house, the same market-cap bands — but the contents moved. A life cycle group replaced solution-oriented schemes; debt gained a sectoral category; dividend yield, value, contra and focused funds now need 80% in equity rather than 65%; a fund house may run both a value and a contra fund; and most debt categories were renamed. Existing schemes had until 26 August 2026 to re-align.

What are the types of mutual funds in India?

Every new open-ended scheme in India belongs to one category inside one of five groups:

Equity — mostly shares, categorised by company size or mandate.
Debt — bonds, government securities and money-market paper, categorised by how long the paper runs and whose credit it carries.
Hybrid — a stated mix of equity and debt, sometimes with gold.
Life cycle — target-date schemes that shift from equity towards debt on a set glide path as their maturity year nears; this group replaced solution-oriented schemes in 2026.
Other — rule-based structures: index funds, ETFs and fund of funds.

The group tells you which risks you face; the category tells you how much of each.

Mutual funds types in India: the master table

Risk levels are indicative for the category, not a scheme’s actual risk-o-meter reading; the horizon column describes what the mandate is designed around. Neither is a recommendation.

Group	Category	What it must hold	Typical risk	Horizon
Equity	Large cap	Min 80% top-100 companies	Moderately high	5 yrs+
Equity	Large & mid cap	Min 35% each, large and mid	High	5 yrs+
Equity	Mid cap	Min 65% ranks 101-250	Very high	7 yrs+
Equity	Small cap	Min 65% ranks 251 onward	Very high	7 yrs+
Equity	Multi cap	Min 75% equity; 25% each size band	Very high	7 yrs+
Equity	Flexi cap	Min 65% equity, any size band	High	5 yrs+
Equity	Focused	Min 80% equity, max 30 stocks	Very high	7 yrs+
Equity	Dividend yield	Min 80% equity, mainly dividend-yielding stocks	High	5 yrs+
Equity	Value	Min 80% equity, value strategy	High	7 yrs+
Equity	Contra	Min 80% equity, contrarian strategy	High	7 yrs+
Equity	Sectoral or thematic	Min 80% one sector or theme	Very high	7 yrs+
Equity	ELSS	Min 80% equity; 3-year lock-in	Very high	Lock-in
Debt	Overnight	One-day paper	Low	Days
Debt	Liquid	Paper maturing within 91 days	Low	Days to weeks
Debt	Ultra short term	Macaulay duration 3-6 months	Low to moderate	3-6 months
Debt	Ultra short to short term	Duration 6-12 months	Low to moderate	6-12 months
Debt	Money market	Instruments up to one year	Low to moderate	Up to a year
Debt	Short term	Duration 1-3 years	Moderate	1-3 yrs
Debt	Medium term	Duration 3-4 years	Moderate	3-4 yrs
Debt	Medium to long term	Duration 4-7 years	Moderate to high	4-7 yrs
Debt	Long term	Duration above 7 years	Moderate to high	7 yrs+
Debt	Dynamic term	Any duration, manager’s call	Moderate to high	3 yrs+
Debt	Corporate bond	Min 80% AA+ and above corporate bonds	Moderate	2-3 yrs
Debt	Credit risk	Min 65% AA and below corporate bonds	High	3 yrs+
Debt	Banking & PSU	Min 80% bank, PSU, PFI, municipal paper	Low to moderate	2-3 yrs
Debt	Gilt	Min 80% government securities	High on rates, low credit	3 yrs+
Debt	10-year constant maturity gilt	Min 80% G-secs, duration ~10 years	High on rates	7 yrs+
Debt	Floating interest rates	Min 65% floating-rate instruments	Low to moderate	1-3 yrs
Debt	Sectoral debt	Min 80% one sector’s AA+ and above paper	Moderate to high	3 yrs+
Hybrid	Conservative hybrid	10-25% equity, rest debt	Moderate	3 yrs+
Hybrid	Balanced hybrid	40-60% equity	Moderately high	5 yrs+
Hybrid	Aggressive hybrid	65-80% equity	Moderately high	5 yrs+
Hybrid	Balanced advantage	Equity 0% to 100%	Moderately high	3-5 yrs+
Hybrid	Multi asset allocation	Three asset classes, min 10% each	Moderately high	3-5 yrs+
Hybrid	Arbitrage	Min 65% equity, hedged with futures	Low to moderate	Months
Hybrid	Equity savings	Equity, arbitrage, debt in set minimums	Moderate	2-3 yrs+
Life cycle	Life cycle fund (5-30 yrs)	Equity-to-debt glide path; 5-20% equity in final year	Falls as maturity nears	To the maturity year
Other	Index fund or ETF	Min 95% in index securities	Same as the index	Tracks the index
Other	Fund of funds	Min 95% in underlying scheme	Same as underlying	Tracks underlying

The 2026 framework renamed most debt categories: ultra short duration became ultra short term, low duration became ultra short to short term, the short, medium, medium to long and long duration funds became “term” funds, dynamic bond became dynamic term and floater became floating interest rates. AMFI’s daily NAV file in September 2026 still carried some schemes under the old labels, so factsheets and older articles may use either name.

Equity mutual funds: size first, mandate second

The equity shelf is organised mainly by company size, the cleanest proxy for how violently a portfolio can move. Large caps are the hundred biggest listed businesses — widely researched, widely held, still capable of falling 30% in a bad year. Mid and small caps trade thinner, fall harder in stress and take longer to recover, hence their longer stated horizons.

Multi cap versus flexi cap causes most of the confusion, because the two were once one thing. In September 2020 SEBI required multi-cap funds to hold at least 25% in each size band; houses that did not want the constraint got an unconstrained category, flexi cap, that November. A flexi-cap fund may sit at 90% large cap or 60% small cap; a multi-cap fund cannot.

Sectoral and thematic funds sit at the far end, where a minimum of 80% in one industry removes the diversification a pooled product otherwise provides. The 2026 rules add an overlap test: a sectoral or thematic scheme may share no more than 50% of its portfolio with the fund house’s other equity schemes, large-cap funds excepted, with existing schemes given three years to comply, and the same 50% ceiling applies between a house’s value and contra funds. ELSS is the one equity category defined by a statutory lock-in rather than by what it holds — how that lock-in, its tax deduction, SIP scheduling, withdrawal plans and fund taxation fit a household’s finances is covered by Gale’s sister site WealthStem, while this page stays with fund data.

Debt mutual funds: two risks, seventeen categories

Debt funds are routinely called the safe half of the shelf. Seventeen categories exist precisely because they are not uniformly safe, and the differences run along two axes.

Duration risk is sensitivity to interest rates. Bond prices move opposite to yields, and longer bonds move harder. An illustration, not a forecast: if yields rise one percentage point, a portfolio with a modified duration of about four years sees roughly a 4% fall in the market value of its holdings, before interest accrual offsets any of it. The same rise costs an overnight fund almost nothing. This risk is symmetrical — it produces gains when rates fall — and the category name states it in advance.

Credit risk is the chance a borrower pays late or not at all, and it is not symmetrical. A downgrade or default can take several percent off a NAV in a day, and recovery, if it comes, arrives over years. Write-downs hit several schemes after the IL&FS default of September 2018, and in April 2020 Franklin Templeton wound up six schemes whose holdings could not be sold fast enough to meet redemptions, repaying investors in instalments over years. None of that showed in a returns chart beforehand; it showed in the portfolios. A gilt fund therefore carries heavy duration risk and negligible credit risk, a credit risk fund the reverse, and a liquid fund little of either. The newest category, the sectoral debt fund added in 2026, keeps at least 80% in AA+ or better paper from a single sector — financial services, energy, infrastructure, housing or real estate — so its credit quality is high but concentrated: one sector’s trouble reaches most of the portfolio at once.

Liquid mutual funds and the very short end

Liquid mutual funds hold instruments maturing within 91 days — treasury bills, commercial paper, certificates of deposit — while overnight funds hold one-day paper. Two rule changes since 2019 matter here. Liquid schemes now carry a graded exit load on redemptions within seven days, so parking money for two days has a cost attached; the expense ratio and exit load guide covers how loads work. And valuation norms changed so these portfolios are marked closer to market prices than smoothed by amortisation, which is why a liquid fund’s NAV can now show small daily wobbles.

Hybrid mutual funds: the mixed shelf

Hybrid mutual funds hold equity and debt together in stated proportions, outsourcing the asset-mix decision to the scheme’s rules. The categories differ mainly in how much freedom those rules allow.

Conservative hybrid keeps 10-25% in equity, so debt risks dominate.
Aggressive hybrid runs 65-80% equity and balanced hybrid 40-60%; until 2026 a fund house had to pick one of the two, and it may now offer both.
Balanced advantage may hold anywhere from 0% to 100% equity — two such funds can sit at 30% and 75% on the same day and both comply.
Multi asset allocation holds three asset classes, minimum 10% each, which is how gold usually enters a hybrid.
Arbitrage funds hedge equity with offsetting futures, so the profile behaves more like short-term debt, and equity savings blends directional equity, arbitrage and debt.

The trade-off is visibility: the market risk you carry moves with the manager’s positioning.

The “other” bucket: index funds, ETFs, gold and fund of funds

Everything above is actively managed; the “other” group holds the rule-based alternatives.

An index fund holds an index’s constituents in index weights — at least 95% of assets — aiming to match, not beat. An ETF does the same but trades on the exchange, so it needs the demat setup described in how to start investing in the Indian share market and carries a market price that can drift from NAV; the trade-offs are in ETFs versus mutual funds. Because every Nifty 50 index fund holds the same fifty companies in the same weights, comparing them is unusually clean — expense ratio, tracking difference and size, not manager skill — which is what Gale maintains scheme by scheme in the Nifty 50 index funds comparison.

Gold and silver enter as ETFs backed by physical metal, or as a fund of funds holding such an ETF for investors without a demat account — one extra layer of expense, the caveat that applies to any fund of funds.

Life cycle funds: the group that replaced solution-oriented schemes

Until 2026 one of the five groups was solution-oriented: a retirement fund and a children’s fund, defined not by what they held — either could run an equity, debt or hybrid mandate — but by a lock-in of five years, or until retirement age or the child’s majority. The February 2026 framework dropped that group and put life cycle funds in its place.

A life cycle fund is a target-date scheme. It carries its maturity year in its name, is launched for a tenure of 5 to 30 years in five-year steps, and follows a glide path SEBI prescribes: a 30-year fund holds 65-95% in equity through its first fifteen years and steps down in bands to 5-20% in its final year, with debt, arbitrage and smaller allocations to gold, silver and InvITs filling the rest within set ranges. There is no mandatory lock-in; instead an exit load of 3% applies to units redeemed within a year of investment, 2% within two years and 1% within three. A fund house may keep at most six life cycle funds open for subscription at a time.

The old schemes have not all vanished. Under SEBI’s master circular of 20 March 2026, a fund house that keeps its existing children’s fund may not launch a 20-year life cycle fund, one that keeps its retirement fund may not launch a 30-year one, and one that gives both up stops fresh subscriptions to them and merges them into other schemes with SEBI’s approval. Retirement and children’s funds still appeared in AMFI’s daily NAV file of 23 September 2026, alongside the new life cycle funds.

What a category label does and does not tell you

The framework fixed comparability, not judgment. Three limits matter.

A category is a floor, not a description. A flexi-cap fund must hold 65% equity; it may hold 95%. Two funds in one category can hold very different portfolios and both comply, so the monthly portfolio disclosure is the actual answer.

Risk labels are periodic, not predictive. The risk-o-meter’s six levels are reviewed monthly and grade the portfolio as it stands, not what next year does to it.

What is measurable in advance is cost and composition. The largest avoidable gap sits between the direct and regular plans of one scheme, quantified in direct versus regular plans. Compare returns over identical periods using the cash-flow-aware calculation in XIRR in mutual funds — and remember the NAV level itself ranks nothing.

FAQ

How many kinds of mutual funds are there in India?

Under SEBI’s February 2026 framework there are five groups — equity, debt, hybrid, life cycle and other — subdividing into roughly forty defined categories, generally one scheme per category per fund house. The life cycle group replaced the older solution-oriented group of retirement and children’s funds.

What is the difference between debt mutual funds and liquid mutual funds?

Liquid funds are one category in the debt group, holding paper that matures within 91 days, which keeps rate and credit exposure low. Other debt categories run longer paper or lower-rated borrowers, so “debt fund” spans overnight bills to 10-year government securities.

Are hybrid mutual funds less risky than equity funds?

A hybrid holds less equity, but its debt half carries duration and credit risk of its own, and a balanced advantage fund may run up to 100% equity. The disclosed mix, not the group name, determines the risk carried.

Which types of mutual funds sit at the low-risk end?

Overnight and liquid categories carry the least rate and credit exposure, because their paper matures within days or weeks. Low risk is not no risk: they remain market-valued and move with short-term rates.

Official sources

Regulatory references and linked Gale pages were checked on 24 September 2026. Category definitions were rewritten in February 2026 and amended in SEBI’s master circular of 20 March 2026, and load rules and valuation norms can change again; confirm current SEBI and AMFI material before acting.

What to weigh

The framework is a labelling standard, and it labels well: read a category name and you know the boundaries the scheme must respect, which was not true a decade ago. What it cannot do is choose for you. The category decides more of the outcome than the fund house does — a small-cap scheme and a liquid scheme are different asset classes in the same wrapper. Cost and composition can both be checked before a rupee moves; past return, the figure most argued over, is the least transferable of the three. And mandate floors are minimums, so the monthly portfolio stays the only place real exposure is visible. A category label narrows the question honestly. It does not answer it.

Gale.in is not a SEBI-registered investment adviser or research analyst; this article explains fund categories for education and is not a recommendation to buy or sell any scheme.

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