# Mutual Fund Analysis India > Evaluate an Indian mutual fund scheme properly — SEBI category and mandate, rolling returns rather than point-to-point, expense ratio drag, direct versus regular plans, portfolio overlap, concentration, debt-fund credit and duration risk, and the AMFI market-cap definitions. Use when the user asks whether a fund is good, compares schemes, asks about SIP versus lumpsum, wants a portfolio of funds reviewed, or asks what a flexi cap or a credit risk fund actually is. - Skill: `sharma23yash-oss/mutual-fund-analysis-india` (Agent Skill) - Install (CLI): `npx skillmds@latest add sharma23yash-oss/mutual-fund-analysis-india` - Raw SKILL.md: https://api.skillmd.com/api/skills/sharma23yash-oss/mutual-fund-analysis-india/raw - Safety review: pending - Works with: Claude Code, Claude.ai, OpenAI Codex - Category: Coding & Dev Tools - License: MIT - Author: sharma23yash-oss (https://skillmd.com/u/sharma23yash-oss) - Updated: 2026-09-17 - Page: https://skillmd.com/skills/sharma23yash-oss/mutual-fund-analysis-india --- # Mutual Fund Analysis (India) Indian fund selection is dominated by two errors: judging a scheme on trailing one- and three-year returns, and ignoring the expense drag compounded over a holding period. This skill fixes both. ## Step 1 — Establish the category and the mandate SEBI's scheme categorisation binds each fund to a defined mandate. A fund cannot be compared to a fund in another category. **Equity categories (one scheme per category per AMC):** Large Cap, Large & Mid Cap, Mid Cap, Small Cap, Multi Cap, Flexi Cap, Dividend Yield, Value, Contra, Focused, Sectoral/Thematic, ELSS. **Market-cap definitions come from AMFI**, which publishes the list of stocks by full market capitalisation **every six months**: | Bucket | Definition | |---|---| | Large cap | 1st to 100th company | | Mid cap | 101st to 250th | | Small cap | 251st onward | Minimum allocations that matter: - **Large Cap**: at least 80% in large caps - **Mid Cap**: at least 65% in mid caps - **Small Cap**: at least 65% in small caps - **Multi Cap**: at least 25% each in large, mid and small — a hard constraint that forces small-cap exposure in every market - **Flexi Cap**: at least 65% in equity, **no market-cap constraint** — the manager chooses - **Focused**: maximum 30 stocks - **ELSS**: 3-year lock-in per unit, at least 80% equity **Multi Cap and Flexi Cap are not synonyms.** Multi Cap is mandated into small caps; Flexi Cap can sit entirely in large caps. Users conflate them constantly. **Debt categories** run from Overnight and Liquid through Ultra Short, Low Duration, Money Market, Short, Medium, Medium-to-Long, Long Duration, Dynamic Bond, Corporate Bond, Credit Risk, Banking & PSU, Gilt, Gilt with 10-year constant duration, and Floater. The category names describe **duration and credit mandate** — read them literally. *SEBI has been consulting on and amending the categorisation framework periodically. Verify the current category definitions against the SEBI master circular on mutual funds before relying on a specific limit.* ## Step 2 — Rolling returns, never point-to-point Trailing returns are an artefact of the start and end dates. A fund that looks brilliant on 5-year trailing returns may simply have a favourable start point. Compute **rolling returns**: every possible 3-year (and 5-year) period in the fund's history, rolled daily or monthly. Report: - Median rolling return - 25th and 75th percentile - % of periods the fund beat its benchmark - % of periods the fund beat its category median - Worst rolling period **Consistency beats peak performance.** A fund beating its benchmark in 80% of rolling 3-year periods is a better proposition than one with a higher trailing return driven by two exceptional quarters. Always name the **benchmark** — SEBI requires a Tier-1 benchmark per category, and **Total Return Index (TRI)** benchmarking is mandatory, so any comparison against a price index is stale and flattering. ## Step 3 — Cost ``` Return drag = TER, charged daily on NAV Direct plan TER = Regular plan TER − distributor commission Typical gap: 0.5%–1.2% per year for equity schemes ``` Compound it. A 1% annual gap over 20 years on a ₹10,000 monthly SIP is a very large number — compute it explicitly for the user rather than describing it as "a bit lower". - TER is capped by SEBI on a **slab basis that declines as scheme AUM rises**. A large scheme should have a lower TER; check whether it does. - **Direct plans** are bought from the AMC or an execution-only platform. **Regular plans** pay a distributor. If the user is choosing funds themselves, they are paying for advice they are not receiving. - Exit load: typically 1% within 12 months for equity schemes; nil for most liquid and overnight funds after the graded 7-day schedule. Check the scheme information document. - Passive alternatives: for large-cap exposure especially, compare against a Nifty 50 or Nifty 100 index fund's TER. The active large-cap category's aggregate record against the TRI benchmark is the relevant comparison, not a single fund's brochure. ## Step 4 — Portfolio quality Pull the monthly portfolio disclosure (mandatory, published by every AMC and aggregated by AMFI): - **Concentration**: top-10 holdings as a % of the portfolio; number of stocks - **Market-cap split** versus the mandate — is a "large cap" fund quietly running 18% mid caps for extra return? - **Sector concentration** versus benchmark - **Cash levels** — persistent high cash is an implicit market call the investor did not ask for - **Portfolio turnover** — high turnover means transaction costs not captured in the TER - **Overlap between schemes.** Compute the common-holding percentage between any two funds the user holds. Two "diversified" large-cap funds frequently overlap 60–80%; the user owns one fund and pays for two. ``` Overlap % = Σ min(weight_A(stock), weight_B(stock)) across all stocks ``` ## Step 5 — Debt funds: read credit and duration separately Two risks, always separated: **Duration risk** — sensitivity to rate moves. ``` Approximate price change ≈ − Modified duration × Δ yield ``` A gilt fund with 7-year duration loses roughly 7% for a 100bp rise in yields. With the RBI repo rate at **5.25%** as at the August 2026 policy, the direction of the cycle matters to which duration bucket is appropriate — confirm the current stance before advising. **Credit risk** — the rating profile. Read the portfolio's AAA / AA / A and below split. A **Credit Risk fund** is mandated to hold at least 65% in AA and below. That is the product working as designed, not a defect — but the user must know they are being paid for taking credit risk. Also check the **Potential Risk Class (PRC) matrix** in the scheme document, which SEBI requires: it maps the scheme's maximum permitted credit risk and interest rate risk into a 3×3 cell. It is the most honest single disclosure a debt fund makes. Never describe a debt fund as "safe". Indian debt funds have gated, side-pocketed and written down before. ## Step 6 — SIP versus lumpsum Answer with mechanics, not slogans. - A SIP is **rupee-cost averaging**, which reduces sequence risk and enforces discipline. Over long horizons in a rising market it will usually underperform a lumpsum invested at the start, because the average deployment date is later. Both facts are true; state both. - SIP **XIRR** is the correct return measure for a SIP, not the fund's trailing return. Compute XIRR from the actual cash flows. - **Step-up SIPs** materially change outcomes; model them if the user has an income growth expectation. - For a lumpsum in equity, an STP from a liquid fund over 3–6 months is the usual compromise. Say what it costs (the equity return foregone if markets rise) rather than presenting it as free risk reduction. ## Step 7 — The things that actually predict future performance In order of evidence: 1. **Cost.** The most reliable single predictor available. 2. **Category and mandate fit** with the investor's need. 3. **Consistency of rolling relative performance**, not its level. 4. **Fund house process and stability** — manager tenure, AMC-level risk framework, whether performance survives a manager change. 5. **Scheme size relative to strategy.** A small-cap fund with very large AUM cannot own its stated universe without moving prices; it drifts toward mid caps. Check AUM against the liquidity of the mandate. Star ratings and past-year rankings predict very little. Say so when the user cites them. ## Output format ```markdown # — Review **Category:** | **Benchmark:** | **AUM:** ₹X cr | **TER:** direct x.xx% / regular y.yy% ## Rolling returns (3y, since inception) | | Fund | Benchmark TRI | Category median | | Median | | | | | 25th pct | | | | | Worst | | | | | % periods > benchmark | | | | ## Portfolio - Stocks: N | Top 10: X% | Cash: Y% - Cap split: L / M / S = ... - Mandate compliance: ... ## Cost impact Over , the direct/regular gap of x.xx% costs approximately ₹Z on the stated investment. ## Overlap with the user's other funds | Fund A | Fund B | Overlap % | ## Assessment ``` ## Hard rules - **Never recommend a specific scheme as "the best fund".** Explain what a scheme is, how it has behaved, what it costs, and what it would take for it to suit the user's stated objective. - **Always state the benchmark and that it is TRI.** - **Always show the direct-plan TER** alongside regular, and the compounded cost difference in rupees. - Past performance does not predict future returns. Include that, once, plainly. - This is information, not investment advice. Direct the user to a SEBI-registered investment adviser for a recommendation.