An Equity Fund Scheme is a mutual fund scheme that invests mostly in shares/stocks of companies. Securities and Exchange Board of India (SEBI), the regulator of mutual funds in India vide its circular SEBI/HO/IMD/DF3/CIR/P/2017/114 dated October 6, 2017, redefined the characteristics and norms of equity fund schemes to ensure uniformity in the features of similar schemes launched by different mutual fund houses. The revised norms are announced to ensure convenience to the investor to evaluate different schemes and to take informed investment decision.
Equity Mutual Fund Scheme- What is it?
An Equity mutual fund scheme invests major portion of the fund in shares/stocks of companies with the objective of providing long term capital appreciation. Hence these schemes are also termed growth funds. They are mainly open ended funds or scheme which is available for investment and repurchase on a continuous basis.
The fund manager conducts researches on the management, fundamentals, performance, and future business potential of the companies and selects the best stocks. Different types of schemes address the requirements of different types of investors. The investments of the fund could be in Large Cap, Mid Cap or Small Cap shares.
The investment can also be restricted in the shares of limited number of companies or dividend yielding companies. The scheme can also focus on a specific theme or sector. In theme/ sector specific schemes, invests are only in the stocks in a particular sector or theme, say, banking or healthcare.
The equity fund thus invests in the shares of selected companies, extends the benefit of professional management of funds and ensures diversification of investment to an investor.
There are different equity funds catering to various needs of investors. The broad objective of all is to generate appreciation over long periods.
Equity Mutual Fund Scheme – Norms for fund scheme categorization and scheme characteristics
The revised norms for scheme categories under equity mutual fund scheme and the characteristics are as shown below:
|
Sl No |
Category of MF Schemes |
Scheme Characteristics |
MF scheme category description |
|
1 |
Multi Cap Fund |
Minimum investment in equity & equity related instruments- 65% of total assets |
Multi Cap Fund- An open ended equity scheme that invests in large cap, mid cap and small cap stocks |
|
2 |
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 investing mainly in large cap stocks |
|
3 |
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 asset |
Large & Mid Cap Fund- An open ended equity scheme that invests mainly in both large cap and mid cap stocks |
|
4 |
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 that concentrates investing in mid cap stocks |
|
5 |
Small cap Fund |
Minimum investment in equity & equity related instruments of small cap companies- 65% of total asset |
Small Cap Fund- An open ended equity scheme with investment focus in small cap stocks |
|
6 |
Dividend Yield Fund |
Scheme should predominantly invest in dividend yielding stocks. Minimum investment in equity- 65% of total assets |
Dividend Yield Fund -An open ended equity scheme predominantly investing in dividend yielding stocks |
|
7 |
Value Fund* |
Scheme should follow a value investment strategy. Minimum investment in equity & equity related instruments – 65% of total assets |
Value Fund- 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 |
Contra Fund – An open ended equity scheme following contrarian investment strategy |
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*Mutual Funds houses are permitted to offer either Value fund or Contra fund |
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8 |
Focused Fund |
A scheme focused on the number of stocks (maximum 30) Minimum investment in equity & equity related instruments – 65% of total assets |
Focused Fund – An open ended equity scheme investing in maximum 30 stocks . The scheme has to mention where the scheme intends to focus, viz., multi cap, large cap, mid cap, small cap. |
|
9 |
Sectoral/ Thematic |
Minimum investment in equity & equity related instruments of a particular sector/ particular theme- 80% of total assets |
Sectoral/ Thematic – An open ended equity scheme investing in a specific sector or following a specific theme. The theme/ sector has to be specified. |
|
10 |
Minimum investment in equity & equity related instruments – 80% of total assets (in accordance with Equity Linked Saving Scheme, 2005 notified by Ministry of Finance |
ELSS -An open ended equity linked saving scheme with a statutory lock in of 3 years and tax benefit |
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