Multi-cap funds strategically allocate investments across various market capitalizations, offering a risk profile lower than mid-cap or small-cap funds but higher than large-cap funds. The best multi-cap mutual funds in India are managed by professionals who continually assess market conditions and adjust the balance of large-cap, small-cap, and mid-cap stocks in their portfolios to optimize returns.
Long Horizon
37 Funds
₹1,79,207 Cr Total AUM
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| Fund name | Fund size | Expense Ratio | 3Y Returns  |
|---|---|---|---|
 Kotak Multicap Fund Direct Growth Multi-Cap Very High Risk | ₹15,816 Cr | 0.39% | 29.1% |
 Nippon India Multi Cap Fund Direct Growth Multi-Cap Very High Risk | ₹39,000 Cr | 0.73% | 28.5% |
 HDFC Multi Cap Fund Direct Growth Multi-Cap Very High Risk | ₹17,249 Cr | 0.64% | 26.5% |
 ITI Multi Cap Fund Direct Growth Multi-Cap Very High Risk | ₹1,381 Cr | 0.32% | 23.1% |
Mahindra Manulife Multi Cap Fund Direct Growth Multi-Cap Very High Risk | ₹4,857 Cr | 0.45% | 22.9% |
 Axis Multicap Fund Direct Growth Multi-Cap Very High Risk | ₹6,807 Cr | 0.69% | 22.7% |
 Invesco India Multicap Fund Direct Growth Multi-Cap Very High Risk | ₹3,897 Cr | 0.66% | 22.6% |
 ICICI Pru Multicap Fund Direct Growth Multi-Cap Very High Risk | ₹14,193 Cr | 0.93% | 22.4% |
 Baroda BNP Paribas Multi Cap Fund Direct Growth Multi-Cap Very High Risk | ₹2,790 Cr | 0.93% | 22.3% |
 Bandhan Multi Cap Fund Direct Growth Multi-Cap Very High Risk | ₹2,448 Cr | 0.56% | 21.0% |
Identify red flags in your mutual funds and how to fix them
Multi-cap mutual funds are mandated by the Securities and Exchange Board of India (SEBI) to invest at least 25% in each of large-cap, mid-cap and small-cap companies. The last 25% can be invested in equity (any market cap/sector) or even debt instruments based on the fund's objective.
As per SEBI regulations, the following are the definitions of large, mid and small cap companies:
Both mid and small-caps have high growth potential, thus making multi-cap funds well-diversified funds.
Since multi-cap funds invest a minimum of 25% in each market capitalisation, they enjoy a mix of:
The table below summarizes the returns from large, mid, small and multi-cap indices of Nifty.
| Index | 1Y | 2Y | 3Y | 5Y |
| Nifty 500 Multicap 50 25 25 | 13.6% | 7.3% | 24.9% | 15.7% |
| Nifty 100 | 3.0% | 2.2% | 17.2% | 12.3% |
| Nifty Midcap 150 | 21.5% | 12.1% | 30.7% | 19.0% |
| Nifty Small cap 100 | 30.2% | 7.9% | 30.2% | 15.5% |
Source: NSE
As you can see, the multi-cap index has given higher returns than the large caps but slightly lower returns than the mid and small-cap indices. With lower risk than pure mid or small caps, you can earn high returns through multi caps.
Multi-cap funds invest in companies across different market capitalisations. Each category of market capitalisation has a unique set of benefits.
By investing in companies across market capitalisations, multi-cap funds capture the different opportunities of each of them. Moreover, they invest in companies without any style or sector bias, making them well diversified.
Investing in multi-cap funds can help in creating long-term wealth. This is because they primarily invest in equity and related instruments, which have a high growth potential in the long term. Take a look at the returns of the Nifty 500 Multicap 50:25:25 index in the last three, five, seven and ten years.
| Index | 3Y | 5Y | 7Y | 10Y |
| Nifty 500 Multicap 50 25 25 | 24.9% | 15.7% | 12.9% | 15.6% |
Source: NSE
An investment of Rs 1 lakh made 10 years ago in a multi-cap fund would be at least Rs 4.26 lakhs today. If an SIP of Rs 5,000 were started ten years back in a multi-cap fund, the total investment today would be Rs 6 lakhs, and the current value would be Rs 14.45 lakhs. This shows long-term investing in multi-cap funds will help accumulate wealth through the power of compounding.
One of the worst market crashes was witnessed in 2020, right before the lockdown. In just thirty days, the Nifty 50 crashed by 34% due to the pandemic and uncertainty.
The Nifty 500 Multicap 50:25:25 index, on the other hand, crashed by 39% during the same period. This shows that during bear market phases and market crashes, the multi-cap category can take a hit.
| Index | Return during Feb-March 2020 |
| Nifty 50 | -34.0% |
| Nifty 500 Multicap 50 25 25 | -39.0% |
Source: NSE
Despite anticipating a market correction, the fund managers of multicap funds are obliged by SEBI regulations to invest in large, mid and small cap companies.
To invest or not invest in multi-cap mutual funds will depend on your goals and risk tolerance level. Since multi-cap funds invest majorly in equity, they can be very risky. Hence, you should consider investing in them only if you want to:
Multi-cap funds are an example of the best of both worlds, as they offer stability from large-cap companies and growth potential from mid and small-cap companies. If you are looking for an optimal balance in your portfolio, then multi-cap funds are your go-to funds.
Multi-cap funds help build wealth in the long term and best suit long-term goals such as retirement or a child's education. Since they offer higher returns than pure large-cap funds and also have mid and small-cap exposure, adding them to your portfolio can help in accumulating a huge corpus.
Note: The above information is for educational purposes only. It is best to consult a financial advisor before making investment decisions.
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Hybrid funds are a combination of equity and debt investments. The blend of these asset classes varies based on the fund's investment goals.
Debt Mutual Funds invest in fixed-income securities such as government bonds, corporate bonds, treasury bills, and other money market instruments.
