Types of Mutual Funds in India in 2023

Mutual funds are a popular investment option in India, providing investors with a diverse range of investment opportunities to suit their financial goals and risk tolerance. There are various types of mutual funds available in India, each with its own unique set of characteristics and benefits. In this article, we’ll take a closer look at the types of mutual funds in India, including equity funds, debt funds, hybrid funds, index funds, and sector funds.

Overview of Types of Mutual Funds in India

As per AMFI India, there are more than 17000+ different mutual funds available to invest in India. As a retail investor, it often becomes challenging to understand the difference between different various types of mutual funds in India.

Types of mutual funds in India can be broadly categorized into 2 categories:

1. Close-ended mutual funds
2. Open-ended mutual funds

Different types of close-ended mutual funds

Different types of Open-Ended Mutual Funds

Different types of Equity Mutual Funds

Here is a snapshot of different types of equity mutual funds in India:

Equity Mutual Fund Categorization

On October 6, 2017, SEBI came out with circular to categorize equity mutual funds based on below criteria:

Category of Schemes	Scheme Characteristics	Type of scheme (uniform description of the scheme)
Multi-Cap Fund	Minimum investment in equity & equity-related instruments- 65% of total assets	Multi Cap Fund- An open-ended equity scheme investing across large cap, mid cap, small cap stocks
Large Cap Fund	Minimum investment in equity & equity related instruments of large cap companies- 80% of total assets	Large Cap Fund- An open-ended equity scheme predominantly investing in large-cap stocks
Large & Mid Cap Fund	Minimum investment in equity & equity related instruments of large cap companies- 35% of total assets Minimum investment in equity & equity related instruments of mid cap stocks- 35% of total assets	Large & Mid Cap Fund- An open ended equity scheme investing in both large cap and mid cap stocks
Mid Cap Fund	Minimum investment in equity & equity related instruments of mid cap companies- 65% of total assets	Mid Cap Fund- An open ended equity scheme predominantly investing in mid cap stocks
Small-cap Fund	Minimum investment in equity & equity related instruments of small cap companies- 65% of total assets	Small Cap Fund- An open ended equity scheme predominantly investing in small cap stocks
Dividend Yield Fund	Scheme should predominantly invest in dividend yielding stocks. Minimum investment in equity- 65% of total assets	An open ended equity scheme predominantly investing in dividend yielding stocks
Value Fund*	Scheme should follow a value investment strategy. Minimum investment in equity & equity related instruments – 65% of total assets	An open ended equity scheme following a value investment strategy
Contra Fund*	Scheme should follow a contrarian investment strategy. Minimum investment in equity & equity related instruments – 65% of total assets	An open ended equity scheme following contrarian investment strategy
Focused Fund	A scheme focused on the number of stocks (maximum 30) Minimum investment in equity & equity related instruments – 65% of total assets	An open ended equity scheme investing in maximum 30 stocks (mention where the scheme intends to focus, viz.,multi cap, large cap, mid cap, small cap)
Sectoral/ Thematic	Minimum investment in equity & equity related instruments of a particular sector/ particular theme- 80% of total assets	An open ended equity scheme investing in __ sector (mention the sector)/ An open ended equity scheme following __ theme (mention the theme)
ELSS	Minimum investment in equity & equity related instruments – 80% of total assets (in accordance with Equity Linked Saving Scheme, 2005 notified by Ministry of Finance)	An open ended equity linked saving scheme with a statutory lock in of 3 years and tax benefit

Different types of Debt Mutual Funds

Here is a snapshot of different types of debt mutual funds in India:

Debt Mutual Fund Categorization

On October 6, 2017, SEBI came out with circular to categorize debt mutual funds based on below criteria:

Category of Schemes	Scheme Characteristics	Type of scheme (uniform description of the scheme)
Overnight Fund	Investment in overnight securities having maturity of 1 day	An open ended debt scheme investing in overnight securities
Liquid Fund	Investment in Debt and money market securities with maturity of upto 91 days only	An open ended liquid scheme
Ultra Short Duration Fund	Investment in Debt & Money Market instruments such that the Macaulay duration of the portfolio is between 3 months – 6 months	An open ended ultra-short term debt scheme investing in instruments with Macaulay duration between 3 months and 6 months
Low Duration Fund	Investment in Debt & Money Market instruments such that the Macaulay duration of the portfolio is between 6 months- 12 months	An open ended low duration debt scheme investing in instruments with Macaulay duration between 6 months and 12 months
Money Market Fund	Investment in Money Market instruments having maturity upto 1 year	An open ended debt scheme investing in money market instruments
Short Duration Fund	Investment in Debt & Money Market instruments such that the Macaulay duration of the portfolio is between 1 year – 3 years	An open ended short term debt scheme investing in instruments with Macaulay duration between 1 year and 3 years
Medium Duration Fund	Investment in Debt & Money Market instruments such that the Macaulay duration of the portfolio is between 3 years – 4 years	An open ended medium term debt scheme investing in instruments with Macaulay duration between 3 years and 4 years
Medium to Long Duration Fund	Investment in Debt & Money Market instruments such that the Macaulay duration of the portfolio is between 4 – 7 years	An open ended medium term debt scheme investing in instruments with Macaulay duration between 4 years and 7 years
Long Duration Fund	Investment in Debt & Money Market Instruments such that the Macaulay duration of the portfolio is greater than 7 years	An open ended debt scheme investing in instruments with Macaulay duration greater than 7 years
Dynamic Bond	Investment across duration	An open ended dynamic debt scheme investing across duration
Corporate Bond Fund	Minimum investment in corporate bonds- 80% of total assets (only in highest rated instruments)	An open-ended debt scheme predominantly investing in highest rated corporate bonds
Credit Risk Fund	Minimum investment in corporate bonds- 65% of total assets (investment in below highest rated instruments)	An open ended debt scheme investing in below highest rated corporate bonds
Banking and PSU Fund	Minimum investment in Debt instruments of banks, Public Sector Undertakings, Public Financial Institutions- 80% of total assets	An open ended debt scheme predominantly investing in Debt instruments of banks, Public Sector Undertakings, Public Financial Institutions
Gilt Fund	Minimum investment in Gsecs- 80% of total assets (across maturity)	An open ended debt scheme investing in government securities across maturity
Gilt Fund with 10 year constant duration	Minimum investment in Gsecs- 80% of total assets such that the Macaulay duration of the portfolio is equal to 10 years	An open ended debt scheme investing in government securities having a constant maturity of 10 years
Floater Fund	Minimum investment in floating rate instruments- 65% of total assets	An open ended debt scheme predominantly investing in floating rate instruments

Different types of Hybrid Mutual Funds

Here is a snapshot of different types of hybrid mutual funds in India:

Hybrid Mutual Fund Categorization

On October 6 2017, SEBI came out with circular to categorize hybrid mutual funds based on below criteria:

Category of Schemes	Scheme Characteristics	Type of scheme (uniform description of the scheme)
Conservative Hybrid Fund	Investment in equity & equity related instruments- between 10% and 25% of total assets; Investment in Debt instruments- between 75% and 90% of total assets	An open ended hybrid scheme investing predominantly in debt instruments
Balanced Hybrid Fund	Equity & Equity related instruments- between 40% and 60% of total assets; Debt instruments- between 40% and 60% of total assets No Arbitrage would be permitted in this scheme	An open ended balanced scheme investing in equity and debt instruments
Aggressive Hybrid Fund	Equity & Equity related instruments- between 65% and 80% of total assets; Debt instruments- between 20% 35% of total assets	An open ended hybrid scheme investing predominantly in equity and equity related instruments
Dynamic Asset Allocation or Balanced Advantage	Investment in equity/ debt that is managed dynamically	An open ended dynamic asset allocation fund
Multi-Asset Allocation	Invests in at least three asset classes with a minimum allocation of at least 10% each in all three asset classes	An open-ended scheme investing in multiple asset classes
Arbitrage Fund	Scheme following arbitrage strategy. Minimum investment in equity & equity related instruments- 65% of total assets	An open ended scheme investing in arbitrage opportunities
Equity Savings	Minimum investment in equity & equity related instruments- 65% of total assets and minimum investment in debt- 10% of total assets Minimum hedged & unhedged to be stated in the SID. Asset Allocation under defensive considerations may also be stated in the Offer Document	An open ended scheme investing in equity, arbitrage and debt

Different types of Solution-oriented mutual funds

Here are the different types of Solution-oriented mutual funds in India:

Solution-Oriented Mutual Fund Categorization

On October 6, 2017, SEBI came out with circular to categorize Solution-oriented mutual funds based on below criteria:

Category of Schemes	Scheme Characteristics	Type of scheme (uniform description of the scheme)
Retirement Fund	Scheme having a lock-in for at least 5 years or till retirement age whichever is earlier	An open-ended retirement solution-oriented scheme having a lock-in of 5 years or till retirement age (whichever is earlier)
Children’s Fund	Scheme having a lock-in for at least 5 years or till the child attains age of majority whichever is earlier	An open ended fund for investment for children having a lock-in for at least 5 years or till the child attains age of majority (whichever is earlier)

Different types of other Mutual Funds Schemes

Here is a snapshot of different types of other category mutual funds in India:

Other Schemes of Mutual Fund Categorization

Category of Schemes	Scheme Characteristics	Type of scheme (uniform description of scheme)
Index Funds/ ETFs	The minimum investment in securities of a particular index (which is being replicated/ tracked)- 95% of total assets	An open ended scheme replicating/ tracking _ index
FoFs – Fund of funds (Overseas/ Domestic)	Minimum investment in the underlying fund- 95% of total assets	An open ended fund of fund scheme investing in other mutual funds.

Consider reading – Index fund vs ETF

Types of mutual funds in India – How to Select the Right Fund type?

Selecting the right mutual fund type can be a daunting task. You need to be careful while selecting a mutual fund to invest in. Before you start investing in a mutual fund ask yourself below questions:

1. The time period of investment
2. willingness to take risk
3. Liquidity requirements

It’s often seen that many close-ended mutual funds are sold with higher returns promised to investors. The investor doesn’t realize the terms and conditions of the fund and ends up losing the entire capital.

So when you invest in any type of mutual fund in India, always ask yourself- which type of mutual fund investment you are doing? what is the risk involved in that?

What is the risk involved in Different Types of Mutual Funds?

There is always risk involved in any investment you do. In mutual funds depending on the type of fund, you invest the risk varies.

Equity mutual funds carry the highest risk as your money is invested into stocks. If the stock market does well then you get excellent returns but when the stock market falls then you lose money.

Hybrid mutual funds carry less risk compared to equity funds but they have some element of risk as they invest in a mix of both equity and debt.

Debt mutual funds have less risk as compared to equity and hybrid mutual funds as they invest money in debt instruments which are relatively safe than equity mutual funds. But recently it’s seen that debt mutual funds have started giving huge negative returns depending on the fund you have to invest in. So be careful while selecting a debt mutual fund. Read more about – Are debt funds safe?

Types of Mutual Funds in India – How to select a Mutual Fund?

Before you select a mutual fund to invest in. You must evaluate the fund. Here are the 5 factors you must consider before selecting a fund:-

1. What is the Long Term Record of the Mutual fund?
2. Who is the Fund Manager for the mutual fund?
3. What is the track record of the AUM for the Fund?
4. What is the Risk vs Return Record for the fund?
5. What is the TER for the Fund?

Read more about selecting a mutual fund here – How to select mutual funds India?

Final Thoughts on Types of Mutual Funds in India

In conclusion, mutual funds are a popular investment option in India, providing investors with a diverse range of opportunities to suit their financial goals and risk tolerance. From equity funds and debt funds to hybrid funds, index funds, and sector funds, there are various types of mutual funds in India to suit different investment objectives. It’s important to understand the characteristics and benefits of each type of mutual fund before making a decision.

By considering factors such as risk, return potential, fees, and diversification, investors can choose the right type of mutual fund to meet their investment goals. So, take the time to evaluate your investment needs and choose the right type of mutual fund to achieve financial success and stability.

FAQs on Types of Mutual Funds in India