Portfolio Analysis — Top Holdings, Sector Allocation, AUM
Portfolio analysis looks at what a scheme actually holds: how concentrated it is, where it differs from its benchmark, how much it trades and how far it overlaps with other schemes. This lesson explains each reading and the two formulas behind turnover and overlap.
Concentration and sector split
The weight of the largest holdings shows how concentrated a scheme is. A high top-10 weight means a few holdings drive more of the result, in either direction.
Sector allocation, set beside the benchmark's sector weights, shows where the scheme is overweight or underweight. Those differences are where its return can part from the benchmark's.
Size
Assets under management matter most where the shares held are small and thinly traded. A large scheme may find it harder to buy or sell smaller, less liquid shares without moving their price.
Growth in size does not change a scheme's category. Under SEBI's categorisation a small-cap scheme still has to hold at least 65% in small-cap shares, however large it becomes.
Turnover
Portfolio turnover measures how much a scheme trades: the lower of purchases or sales, divided by average assets under management. Because the lower of the two is used, buying done only to invest new money, or selling done only to meet redemptions, does not by itself raise the figure.
A turnover of 100% means trading equal to the scheme's average size in a year. It does not mean every holding was replaced. Trading has a cost: brokerage and transaction costs are charged to the scheme as part of its total expense ratio.
Overlap and cash
Portfolio overlap between two schemes is the sum of the lower of the two weights of each holding they have in common. Schemes with a high overlap give largely similar exposure, each with its own expense ratio. Under the SEBI Master Circular for Mutual Funds (20 March 2026), fund houses disclose category-wise overlap every month.
Cash in a portfolio can reflect inflows awaiting deployment, money kept for redemptions, settlement timing or the manager's view of the market. The factsheet shows how much is in cash on that date; it does not say which reason applies.
Holdings change, so every one of these readings describes one date only.
Rules at a glance
What a cash figure does and does not say (illustrative)
Assumed figures: an equity scheme's factsheet shows 7% of assets in cash at month-end, up from 3% a month earlier.
The rise could come from a large inflow received just before month-end and not yet invested, from money set aside for redemptions, from settlement timing or from the manager's view of the market. The factsheet gives the 7% and the date. It does not say which of these applies, and the figure may be different by the next disclosure.
Overlap and turnover (illustrative)
- Assumed figures, for arithmetic only. Scheme A holds four shares: W 40%, X 30%, Y 20%, Z 10%. Scheme B holds three: W 20%, X 35%, V 45%.
- The common holdings are W and X. For W the lower weight is 20%; for X the lower weight is 30%. Y, Z and V are held by one scheme only and add nothing.
- Overlap = 20% + 30% = 50%.
- Turnover: in a year a scheme buys securities worth ₹300 crore and sells securities worth ₹450 crore; its average assets under management are ₹1,000 crore. The lower figure is purchases, ₹300 crore.
- Turnover = 300 ÷ 1,000 = 0.30, or 30%.
Result. The two schemes have an overlap of 50%: half of each portfolio, by weight, is matched in the other. The scheme in the turnover example traded 30% of its average size in the year.
Key points
- A high top-10 weight means a few holdings drive more of the result.
- Sector weights set beside the benchmark's show where a scheme is overweight or underweight.
- Portfolio turnover is the lower of purchases or sales divided by average assets under management.
- Portfolio overlap is the sum of the lower of the two weights of each common holding; fund houses disclose category-wise overlap monthly.
- A cash figure shows how much is held in cash, not the reason for it.
Common misunderstandings
- A turnover of 100% does not mean every holding was replaced: it means trading equal to the scheme's average size in a year.
- Holding several schemes is not the same as holding different portfolios: with a high overlap they give largely similar exposure, each with its own expense ratio.
- A small-cap scheme does not become a mid-cap scheme by growing: it still has to hold at least 65% in small-cap shares.
Questions people ask
What does an overlap of about 55% between two schemes mean?
More than half of each portfolio, by weight, is matched in the other, so the two hold largely the same securities.
Can a reader tell from the factsheet why a scheme holds cash?
No. The figure shows how much is in cash on that date, not the reason.
Is there a top-10 weight that marks a scheme as concentrated?
No standard cut-off exists; the figure is read against similar schemes.
What this lesson relies on
- SEBI Master Circular for Mutual Funds, 20 March 2026 — portfolio disclosure, category-wise portfolio overlap and scheme categorisation
- SEBI (Mutual Funds) Regulations, 2026 — total expense ratio (brokerage and transaction costs)
- Standard definition of portfolio turnover (plain arithmetic)
This lesson was reviewed independently against these sources on 8 October 2026. Rules change: check the current regulation, scheme document or policy wording before relying on any figure. This is education, not advice.