Depending on the type of fund, Sebi has outlined how each of them should allocate their resources in the respective segment they represent. For example, a large-cap fund can only invest in the top 100 companies based on market value. Likewise, small-cap funds can invest in firms ranked below 250.
Multi-cap funds, on the other hand, can invest in all three market cap segments. However, the proportion of stocks or the amount of exposure to a particular segment in a portfolio could vary, depending on the fund manager's discretion.
For instance, mid-cap and small-cap stocks may be a priority when the economy is booming, and large-cap stocks may get higher weightage during a slowdown.