As an investor, whether resident or NRI/OCI, the aim is to maximize your returns and generate wealth while reducing the risks. But often we get confused by the plentiful choices across markets. Mutual funds over time have become one of the preferred investment options. Among the various types of mutual funds, multi cap funds are one of the top picks among investors. So what are multi-cap funds and are they beneficial to your portfolio? Find all you need to know about the multi cap funds, meaning, features, benefits, taxation, how to invest and top multi cap funds for NRIs in this blog.
What are Multi Cap Funds?
Multicap funds are a type of mutual fund that allows you to invest around various capitalizations like:
- Large Cap Stocks
- Mid-Cap Stocks
- Small Cap Stocks
Investing in multicap funds offers diversification by including companies of varying sizes and sectors in your portfolio. Unlike funds focusing on specific market segments, multicap funds spread investments across the market, from large-cap to mid-cap and small-cap stocks. This strategy reduces risk by balancing exposure to different parts of the market. Fund managers can adjust portfolios based on market conditions, optimizing opportunities and managing risks. Multicap funds provide a flexible and well-rounded investment approach suited to navigate market dynamics effectively. Since multi-cap funds aim to balance risks and return, these funds are suitable for investors with various risk preferences and investment timelines.
Also read: What is Flexi Cap Funds: Meaning, Features, Benefits, How to Invest, Top Flexicap Funds for NRIs
Benefits of Multi Cap Funds
- Diversification: Multi-cap funds invest in companies of various sizes and sectors, providing a diversified portfolio. This approach reduces risk because different sectors can perform differently at any given time. By spreading out investments, multi-cap funds help keep your risk under control.
- Access to all major sectors of the economy: Since these funds don’t limit themselves to a specific market cap or sector, they give you exposure to all the key sectors and companies contributing to the Indian economy forward. This means you won’t miss out on any opportunities in the Indian market.
- Suitable portfolio for current market conditions: The flexibility to adjust the mix between large, mid, and small-cap stocks allows these funds to adapt their portfolio to suit current market conditions. For example, if mid and small-cap stocks become overvalued and seem likely to decline, the fund manager can shift to large-cap stocks for a more protected position.
Also read: What are Balanced Funds, Benefits and How to Invest?
Types of Multi Cap Funds
- Large cap focused multicap funds: These funds allocate 25% or more to large-cap stocks. These add stability and balance to your profile, especially when the market is falling.
- Mid-cap focused multi-funds: These funds focus on more aggressive strategy and larger exposure to mid-cap and small-cap, these caps aim to generate better results.
- No specific focus on any category: Apart from 25% of the investment that is mandatory in each capitalisation, these caps do not focus on any specific category. Fund managers focus on the firm that has the potential to do better than any other funds and invest in shares across all the sectors.
Also read: Aggressive Hybrid Funds for NRI: Meaning, Benefits, Taxation & How to Invest
Taxation on Multi Cap Funds
It’s the post-tax returns that matter. To understand this, you need to know how multi cap funds are taxed. The capital gains from selling your multi cap fund are taxed based on how long you held the investment.
- Short-Term Capital Gain Tax (STCG): If you sell your investments within 1 year, the gains are classified as Short-Term Capital Gains (STCG) and are taxed at 15%.
- Long-Term Capital Gain Tax (LTCG): If you hold your multi cap investment for more than one year, the gains are classified as Long-Term Capital Gains (LTCG). Gains up to ₹1 lakh in a financial year are tax-free. Beyond ₹1 lakh, the gains are taxed at 10%.
Also read: NRI Mutual Fund Taxation in India 2024 Explained
Who Should Invest in Multi Cap Funds?
Multi Cap funds are ideal for investors who:
- Seek Diversification: Investors looking to diversify their portfolio across different market caps to reduce risk.
- Aim for Balanced Growth: Those seeking a balanced approach to risk and return with potential for long-term capital appreciation.
- Prefer Active Management: Individuals who value professional management and strategic asset allocation.
- Have a Long-Term Investment Horizon: Investors with long-term financial goals who can withstand short-term market volatility.
Also read: How understanding the Rule of 8-4-3 can turn your Rs 30,000 monthly into Rs 1.5 cr?
Can NRIs invest in Multi Cap Funds?
Yes, NRIs can legally invest in Multi Cap Funds in Indian markets. This includes NRIs, Persons of Indian Origin (PIOs), and Overseas Citizens of India (OCIs). There are a few legal mandates like getting their Mutual Fund KYC done along with adhering to the rules of FEMA, SEBI, and RBI. Once your KYC is done, you can invest in domestic and international mutual fund schemes offered by Asset Management Companies (AMCs).
Getting your Mutual Fund KYC is mandatory to open an account to invest in mutual funds in India irrespective of the investment amount. The Securities and Exchange Board of India (SEBI) has specified a set of regulations under the Prevention of Money Laundering Act (PMLA), 2002 which mandates that mutual fund houses and intermediaries perform their due diligence on investors before they are compliant to make investments.
For more info on NRIs, PIOs, and OCIs, you can refer here.
Also read: Step-by-Step Guide for NRIs to Pick a Winning Mutual Fund
Top 10 Multi Cap Funds for NRIs in 2024
| Fund Name | Fund Size (In Crores) | Expense Ratio | 1 YR | 3 YR |
| Quant Active Fund Growth for NRI | 9,791 Cr | 1.7% | 55.53% | 24.77% |
| Nippon India Multi Cap Fund – Growth for NRI | 30,500 Cr | 1.6% | 54.37% | 32.03% |
| Kotak Multicap Fund Growth for NRI | 11,090 Cr | 1.7% | 57.99% | – |
| Bank of India Multi Cap Fund Growth for NRI | 498 Cr | 2.5% | 49.49% | – |
| Mahindra Manulife Multi Cap Fund Plan Growth for NRI | 3,478 Cr | 1.9% | 52.41% | 24.28% |
| Axis Multicap Fund Growth for NRI | 5,310 Cr | 1.9% | 48.48% | – |
| LIC MF Multi Cap Fund Growth for NRI | 1,007 Cr | 2.2% | 43.28% | – |
| ICICI Prudential Multicap Fund Growth for NRI | 11,882 Cr | 1.8% | 47.40% | 22.72% |
| HDFC Multi Cap Fund Growth for NRI | 13,425 Cr | 1.7% | 47.66% | – |
| Invesco India Multicap Fund Growth for NRI | 3,345 Cr | 1.9% | 43.57% | 19.55% |
Also read: 𝗕𝗲𝘀𝘁 𝗠𝘂𝘁𝘂𝗮𝗹 𝗙𝘂𝗻𝗱𝘀 for NRI in India 2024
Wrapping Up
Multi Cap funds offer a versatile investment option for those looking to diversify their portfolio and achieve balanced growth. With the flexibility to invest across different market capitalizations and the advantage of professional management, these funds provide a robust approach to navigating the complexities of the stock market.
Investing in Multi Cap funds can be a strategic move to balance risk and reward, ensuring a well-rounded investment portfolio that can adapt to changing market conditions.
Also read: What is the 15x15x15 Rule In Mutual Funds for NRIs?
Invest in NRI Mutual Funds with SBNRI
NRIs can now download the SBNRI App and choose to invest in different NRI mutual fund schemes in India with ease. You can also get detailed mutual fund advice from experts at SBNRI. Also, visit our blog and YouTube channel for more details.
SBNRI is an authorized Mutual Fund Distributor platform & registered with the Association of Mutual Funds in India (AMFI). ARN No. 246671. NRIs willing to invest in mutual funds in India can download the SBNRI App to choose from 2,000+ mutual fund schemes or can connect with the SBNRI wealth team to better understand Mutual Fund investments.
Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions. SBNRI does not intend to predict future returns, please read all related documents before investing.
FAQs
Which is better, large-cap or multicap?
- Investing in multi-cap funds can offer more advantages like lower risk and higher returns over the long term compared to large-cap funds.
What is a bluechip fund?
- A blue chip fund is a type of investment that pools together stocks from stable and well-established companies known for consistent performance. These companies typically have a large market capitalization, which means they carry lower risk. Blue chip funds are considered a reliable investment option offering decent returns.
What is a Flexi Cap fund?
- Flexi-cap funds are like all-in-one package funds. They invest in companies of all sizes – big, medium, and small. So, when you invest in them, you’re getting a piece of all kinds of companies, not just one size.
Which blue chip is best?
- Here is the list of some of the best-performing blue chip funds of 2024:
- SBI Bluechip Fund
- Axis Bluechip Fund
- Mirae Asset Large Cap Fund
- Kotak Bluechip Fund
- Aditya Birla Sun Life Front
- Invesco India Bluechip Fund
- DSP Equity Fund
- Franklin India Bluechip
5. Which multicap fund is best in 2024?
- Here is the list of some of the best-performing multi cap funds of 2024:
- Mahindra Manulife Multi Cap Fund.
- Nippon India Multi Cap Fund.
- Quant Active Fund.
- ICICI Prudential Multicap Fund.
- Invesco India Multicap Fund.
- Sundaram Multi Cap Fund.
- Aditya Birla Sun Life Multi-Cap Fund.
- Axis Multicap Fund.
Which is better, multicap or flexicap?
- It depends on your risk appetite. If you are willing to take higher risk for higher returns, and you trust your fund manager, you can go for flexi cap funds. But if you prefer lower risk and stable returns, and you like to follow the market performance, you may go for multicap funds.
Is a multicap fund good for the long term?
- Multi-cap mutual funds are perfect for investors looking for diversification across various market sizes and sectors. For positive results, it’s recommended to have a long-term investment horizon of at least 5 years when considering multi-cap funds.
