Multi-cap and focused equity funds are two types of mutual fund investments.

Multi-cap and focused equity funds are two types of mutual fund investments.

There are many types of equity funds, but the most common is one that multiplies by market cap. Some sectoral equity funds are separate from a portfolio company's strategy while others adhere more strictly to a specific type of investing.

We will discuss the differences and similarities between multi-cap funds and focused equity funds. Multi-cap funds can invest in small, mid, or large companies across market capitalisations however they do have key differences from a focused equity fund.

What is a Multi-Cap Equity Fund?

In September 2020, the Securities and Exchange Board mandated that multi-cap equity funds invest at least 25% of their holdings in large-, mid- and small-cap companies. To comply with this rule, many multi-cap funds are selling some of their shares in large-chase companies from time to time to buy mid or small stocks.

Focused Equity Fund: Meaning



CharacteristicsMulti-Cap Equity FundsFocused Equity Funds
RisksA less risky investment strategy than a focused equity fund is one that is diversified.Compared to mutual funds that invest in many stocks, which tend to be more stable, risky investments
Growth potential

Keep in mind that managed funds currently have less potential than focused equity funds

If most of these stocks do well, this fund should provide a higher potential for growth.
Asset classes where the funds invest

At least 25% of funds should be invested in large-cap stocks.

– Mid- and small-cap securities should allocate at least a minimum of 15% to 20%.


Investors can invest in up to 30 stocks of all company sizes with this account.


You should invest in companies across various industries.Prioritize investing in a few sectors

Fund manager’s expertise

Like most mutual funds, where the manager is tasked with diversifying risk and choosing companies in a range of sizes that have high potentialGreater emphasis on how fund managers decide on the 30 stocks with highest potential for return.
Less focused on themeMay avoid investing in stocks from the PSU sector.

Focused Fund and a Multi-Cap Fund have many similarities.

1.Some taxability

Both multi-cap equity funds and focused equity funds are taxed as equivalent to equity funds. Short-term capital gains (made by selling units held for less than a year) are taxed at 15%. Long-term capital gains (made by selling units owned for more than a year) are tax free if they're under Rs 1 lakhs.

2. Investors can put money into any size company

Multi-cap indexes and focused equity funds both contain companies of all sizes. This is different from size specific funds, such as large cap or mid-cap index funds.



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