Large & Mid-Cap Funds
Large & mid-cap funds are equity mutual funds that must invest at least 35% in large-cap stocks and at least 35% in mid-cap stocks, combining established companies with faster-growing mid-sized ones.
What Are Large & Mid-Cap Funds?
A large & mid-cap fund is an equity mutual fund that invests in both large companies and mid-sized companies, with a fixed minimum in each. Under SEBI's categorisation rules, the fund must invest:
- at least 35% of total assets in equity of large-cap companies, and
- at least 35% of total assets in equity of mid-cap companies.
The remaining up to 30% can be used flexibly within the scheme's stated asset allocation, for example in additional large or mid caps, small caps, or cash and debt.
This category exists for investors who want the relative stability of large companies along with the higher growth potential of mid-sized companies, in a single fund with a guaranteed minimum share of each.
How Do Large & Mid-Cap Funds Work?
- Companies are ranked by size. SEBI defines market-cap segments by ranking listed companies on full market capitalisation:
- Large cap: 1st to 100th company
- Mid cap: 101st to 250th company
- Small cap: 251st company onwards
- AMFI publishes the list. AMFI updates this classification every six months, and funds use the latest list. When a stock moves between segments, funds generally get time (scheme documents often say one month) to rebalance if needed.
- The fund maintains both minimums. At all times, at least 35% must be in large caps and at least 35% in mid caps.
- The fund manager uses the flexible 30% based on their view, as permitted by the scheme document.
- Performance is compared with a benchmark that combines large and mid caps, such as an index covering the top 250 companies.
Practical Example
Meera invests ₹1,00,000 in a large & mid-cap fund. Suppose the portfolio is:
| Segment | Allocation | Amount | Illustrative 1-year return | Gain/loss |
|---|---|---|---|---|
| Large caps | 50% | ₹50,000 | +10% | +₹5,000 |
| Mid caps | 40% | ₹40,000 | −8% | −₹3,200 |
| Small caps | 5% | ₹5,000 | −15% | −₹750 |
| Cash/debt | 5% | ₹5,000 | +6% | +₹300 |
| Total | 100% | ₹1,00,000 | +₹1,350 |
- Net gain = 5,000 − 3,200 − 750 + 300 = ₹1,350, a return of 1.35% before costs.
- Both minimums are met: large caps 50% (≥35%) and mid caps 40% (≥35%).
In this illustration, the large-cap portion cushioned a bad year for mid caps. In a year when mid caps rally, the same mix would lag a pure mid-cap fund but beat a pure large-cap fund. That trade-off is the core of this category.
Why Are Large & Mid-Cap Funds Important?
- Built-in balance: The 35% floors mean you always have meaningful exposure to both segments, regardless of the fund manager's views.
- Risk profile: Mid caps are generally more volatile than large caps, so these funds usually swing more than large-cap funds but less than mid-cap funds.
- Simplifies portfolio building: One fund can replace a separate large-cap and mid-cap fund for some investors.
- Tax: As equity-oriented funds, gains are taxed under equity rules. As per rules applicable from 23 July 2024, units held up to 12 months attract 20% tax on gains, and units held longer attract 12.5% on total equity long-term gains above ₹1.25 lakh a year.
Key Features
| Feature | Details |
|---|---|
| Large-cap minimum | 35% of total assets |
| Mid-cap minimum | 35% of total assets |
| Flexible portion | Up to 30%, as per scheme document |
| Market-cap definition | Large: top 100; mid: 101–250; small: 251 onwards (by full market cap, AMFI list) |
| Risk level | Usually "Very High" on the riskometer |
| Suggested horizon | Typically long term, as equity can be volatile over short periods |
Benefits and Limitations
Benefits
- Guaranteed minimum exposure to mid-sized growth companies.
- Large-cap portion offers relative stability and liquidity.
- Diversified across sectors and many companies.
Limitations
- More volatile than a pure large-cap fund, especially during mid-cap corrections.
- The fund manager cannot cut mid-cap exposure below 35%, even if mid caps look expensive.
- Mid-cap stocks can be less liquid in stressed markets.
- Can overlap with large-cap or flexi-cap funds you already hold.
Comparison With Related Concepts
| Concept | Meaning | Key difference | Practical implication |
|---|---|---|---|
| Large-cap fund | At least 80% in large caps | Little mid-cap exposure | Lower volatility, less growth tilt |
| Large & mid-cap fund | At least 35% large + 35% mid | Fixed minimum in both | Balanced growth and stability |
| Mid-cap fund | At least 65% in mid caps | Mid caps dominate | Higher growth potential and volatility |
| Flexi-cap fund | At least 65% equity, any market cap | No fixed segment minimums | Manager decides the mix |
| Multi-cap fund | 75% equity; at least 25% each in large, mid, small | Includes compulsory small caps | Higher small-cap risk |
How Do Large & Mid-Cap Funds Apply to Mutual Fund Investors?
- Scheme selection: Look at the actual large/mid/small split in the factsheet. Some funds stay near the minimums; others tilt heavily one way.
- Portfolio overlap: If you already own a large-cap fund and a mid-cap fund, adding this category may duplicate holdings.
- SIPs: Because of mid-cap volatility, a SIP can help spread purchases across market cycles.
- Benchmark check: Compare returns with the scheme's large-midcap benchmark, not with a large-cap index alone.
- Review periodically: Check whether the fund's risk level still matches your risk appetite.
Common Mistakes and Misconceptions
- "It is half large cap and half mid cap." Correct view: only the 35% minimums are fixed; the actual split varies by scheme and over time. Why it matters: two funds in this category can have quite different risk levels.
- "It is as safe as a large-cap fund." Correct view: with 35% or more in mid caps, falls can be deeper. Why it matters: set expectations for volatility before investing.
- "Large & mid-cap and flexi-cap are the same." Correct view: flexi-cap funds have no segment minimums; large & mid-cap funds must hold both. Why it matters: in a flexi-cap fund, mid-cap exposure could be much lower or higher.
- "A company stays large cap forever." Correct view: rankings are revised every six months by AMFI. Why it matters: fund portfolios change as companies move between segments.
Important Terms to Know
- Large-Cap Funds: Funds investing at least 80% in the top 100 companies.
- Mid-Cap Funds: Funds investing at least 65% in companies ranked 101–250.
- Small-Cap Funds: Funds investing at least 65% in companies ranked 251 onwards.
- Flexi-Cap Funds: Equity funds free to invest across market caps.
- Benchmark Index: The index used to judge a fund's performance.
- Volatility: The size of price swings in an investment.
- Asset Allocation: How your money is divided across asset types.
Key Takeaways
- Large & mid-cap funds must hold at least 35% in large caps and 35% in mid caps.
- Large caps are the top 100 companies by full market cap, and mid caps are ranks 101–250, as per AMFI's half-yearly list.
- They are typically more volatile than large-cap funds and less volatile than mid-cap funds.
- Check the actual market-cap split and overlap with your existing funds before investing.
Related Glossary Terms
- Large-Cap Funds
- Mid-Cap Funds
- Flexi-Cap Funds
- Multi-Cap Funds
- Equity Mutual Funds
- Benchmark Index
- Volatility
References
- SEBI circular: Categorization and Rationalization of Mutual Fund Schemes (26 February 2026)
- SEBI circular text (PDF)
- Income Tax Department: Section 198, Income-tax Act, 2025
Educational Disclaimer
This article is published by FynnChintan Finserv, an AMFI-registered mutual fund distributor, for educational and informational purposes only. It is not personalised investment, tax or legal advice, and it does not recommend any specific scheme. Mutual fund investments are subject to market risks; read all scheme-related documents carefully. Regulations and tax rules change from time to time, so please check the latest SEBI and Income Tax rules, and consider your financial goals, risk profile and the scheme documents (or consult a qualified tax adviser) before making a decision.
To understand the building blocks, explore our guides on Large-Cap Funds and Mid-Cap Funds.
Frequently Asked Questions
What is the minimum allocation in a large & mid-cap fund?
SEBI requires at least 35% of total assets in large-cap stocks and at least 35% in mid-cap stocks. The remaining portion can be invested as the scheme document allows, which may include more large or mid caps, small caps, or debt and money market instruments.
How are large-cap and mid-cap companies defined?
Companies are ranked by full market capitalisation. The 1st to 100th are large caps, the 101st to 250th are mid caps, and the 251st onwards are small caps. AMFI publishes the list every six months, and mutual funds follow this list for categorisation.
Is a large & mid-cap fund good for beginners?
It can suit beginners who have a long investment horizon and can tolerate volatility, because it combines stability and growth in one fund. However, it is more volatile than a large-cap fund. Beginners should match the choice with their goals and risk appetite and avoid judging the fund on short-term returns.
Large & mid-cap vs flexi-cap: which is better?
Neither is better in all situations. A large & mid-cap fund guarantees at least 35% mid-cap exposure, while a flexi-cap fund lets the manager move freely between segments. If you want assured mid-cap participation, the former fits; if you prefer to give the manager full flexibility, the latter does.
How are large & mid-cap funds taxed?
They are taxed as equity-oriented funds. As per rules applicable from 23 July 2024, short-term gains (units held up to 12 months) are taxed at 20%, while long-term gains are taxed at 12.5% on the amount above ₹1.25 lakh of total equity long-term gains in a year. IDCW payouts are taxed at your slab rate.
Do large & mid-cap funds have a lock-in?
No. They are open-ended funds without a lock-in, so you can redeem on any business day. An exit load may apply if you redeem within a period specified in the scheme document, often within the first year.
This explanation is for general education only and is not investment advice. Mutual fund investments are subject to market risks; read all scheme-related documents carefully.