SEBI Categorization — From 36 to 40 Categories
SEBI places every mutual fund scheme in a defined category, each with its own portfolio rule. This lesson explains why, how the current list of 40 categories is organised, and the one-scheme-per-category rule with its three exceptions.
Why schemes are categorised
Without common definitions, two schemes with similar names could hold very different portfolios, and comparing them would mean little. SEBI therefore defines a set of categories, each with a portfolio rule that every scheme carrying that label must follow.
A Large Cap Fund, for example, holds at least 80% of its assets in the 100 largest companies by market capitalisation, whichever fund house runs it. The label describes what a scheme must hold. It says nothing about the returns the scheme may earn.
The current framework: 40 categories
SEBI first categorised schemes in 2017, with 36 categories. Its circular of 26 February 2026 redid the list, and the text now forms Chapter 3 of the Master Circular for Mutual Funds dated 20 March 2026. Existing schemes had to comply by 26 August 2026, and a scheme's name must match its category.
The current list has 40 categories in five groups: 13 equity, 17 debt, 7 hybrid, 1 life-cycle and 2 other. Equity categories are defined by company size or by strategy, debt categories by maturity, Macaulay duration or credit rating, and hybrid categories by their mix of asset classes.
Life Cycle Funds and Sectoral Debt Funds are new. Solution-oriented funds (children's and retirement funds) are no longer listed as a category; a fund house may continue its existing fund or discontinue it. The categories come from SEBI's circular and Master Circular, not from the text of the SEBI (Mutual Funds) Regulations, 2026.
One scheme per category
A fund house may offer only one scheme in each category. It cannot, for instance, run two Large Cap Funds or two Flexi Cap Funds side by side, which keeps each of its schemes distinct from the others.
There are three exceptions. A fund house may offer more than one index fund or ETF if each tracks a different index, more than one fund-of-funds if each has different underlying funds, and more than one sectoral or thematic fund if each is on a different sector or theme.
How company size is decided
Several equity categories depend on whether a company is large, mid or small cap. The test is rank by full market capitalisation: the 1st to 100th companies are large cap, the 101st to 250th are mid cap, and the 251st onwards are small cap.
AMFI, the industry association, publishes the list every six months from end-June and end-December data. Because ranks change, a company can move from one segment to another when the list is refreshed, and funds rebalance within a month.
Rules at a glance
Two schemes, one label (illustrative)
Farida, 29, a nurse in Kochi, is reading about two schemes from different fund houses, both labelled Large Cap Fund. Because the label is a SEBI category, she knows that each holds at least 80% in the 100 largest companies.
What the label does not tell her is which of those companies each fund manager has picked, what each scheme charges, or how either has performed. Those details sit in each scheme's own documents and disclosures.
Key points
- The current categorisation has 40 categories: 13 equity, 17 debt, 7 hybrid, 1 life-cycle and 2 other.
- It comes from SEBI's circular of 26 February 2026, now Chapter 3 of the Master Circular; the 2017 framework had 36 categories.
- Existing schemes had to comply by 26 August 2026, and a scheme's name must match its category.
- A fund house may offer one scheme per category, with three exceptions.
- Large, mid and small cap are defined by rank on market capitalisation; AMFI publishes the list every six months.
- A category fixes what a scheme must hold, not what it earns.
Common misunderstandings
- The count is not 36: that was the 2017 framework, and the current categorisation has 40 categories.
- The categories are not part of the SEBI (Mutual Funds) Regulations, 2026: they come from SEBI's circular of 26 February 2026 and the Master Circular.
- SEBI does not publish the large, mid and small cap list: AMFI does, every six months.
Questions people ask
Can one fund house run two index funds?
Yes, if they track different indices. Index funds and ETFs on different indices are one of the three exceptions to the one-scheme-per-category rule.
Were all children's and retirement funds closed in 2026?
No. Solution-oriented funds are no longer a category, but each fund house may continue its existing fund or discontinue it.
What is the main purpose of categorisation?
To give schemes clear, distinct categories so that schemes with the same label follow the same portfolio rule and can be compared across fund houses.
What this lesson relies on
- SEBI Master Circular for Mutual Funds (20 March 2026) — Chapter 3, categorisation of mutual fund schemes
- SEBI circular of 26 February 2026 on categorisation of mutual fund schemes
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.