As investors look ahead in 2026, portfolio construction has become far more nuanced than simply choosing between large-cap stability or small-cap growth. Market cycles are becoming shorter, leadership keeps rotating across market capitalisations, and concentration risk has increased in single‑segment strategies. This is where multicap funds stand out.
Multicap funds offer the flexibility to invest across large-cap, mid-cap, and small-cap stocks within a single portfolio, allowing fund managers to allocate capital based on valuations, earnings visibility, and market opportunities. For long-term investors seeking diversification, adaptability, and participation across market segments, the best multicap mutual funds can play a crucial role in 2026.
This article explores what multicap funds are, why they matter in the current market environment, and the best multicap mutual funds to consider for 2026, along with factors investors should evaluate before investing.
What Are Multicap Mutual Funds?
Multicap mutual funds are equity-oriented funds that invest across companies of different market capitalisations, i.e. large-cap, mid-cap, and small-cap, without being restricted to a fixed allocation. As per SEBI regulations, multicap funds must invest a minimum of 25% each in large-cap, mid-cap, and small-cap stocks, ensuring balanced exposure across the market spectrum.
The defining feature of multicap funds is flexibility. Unlike large-cap or mid-cap funds that operate within narrow boundaries, multicap funds allow fund managers to tilt allocations based on market conditions, relative valuations, sectoral trends, and earnings growth potential.
In practical terms:
- Large-cap exposure provides stability and resilience during volatile phases.
- Mid-cap exposure offers higher growth potential during economic upcycles.
- Small-cap exposure adds alpha-generation opportunities, albeit with higher volatility.
Because of this blend, multicap funds are often recommended by a mutual fund advisor as a core equity holding for investors with a long-term horizon. When chosen carefully, the best multicap mutual funds can help smooth portfolio volatility while capturing growth across market cycles.
Best Multicap Mutual Funds to Invest in 2026
The following funds have demonstrated disciplined portfolio construction, strong risk management, and consistent performance across market cycles, making them worthy candidates among the best multicap mutual funds for 2026.
ICICI Prudential Multicap Fund
AUM: ₹16,263 Cr
Minimum Investment: SIP: ₹100 & Lumpsum: ₹5000
Exit Load: 1% for redemption within 365 days
Investment Philosophy and Strategy: ICICI Prudential Multicap Fund benefits from both value and growth style of investing, aiding wealth creation in the long run. The portfolio is well diversified and avoids extreme sector skewness, with capping on per stock and sector, ensuring that the concentration risk is mitigated.
Performance Snapshot:
| Period | Return (%) | Sharpe Ratio |
| 3 Year | 21.19 | 0.05 |
| 5 Year | 18.52 | 1.05 |
| 10 Year | 16.71 | 0.65 |
The fund has delivered steady long-term returns. Its ability to balance large-cap stability with selective mid- and small-cap exposure has helped it perform across varying market phases.
Recommended Investment Horizon: 5 to 7 years
Current Allocation: Large-cap: 34.55%, Mid-cap: 34.81%, Small-cap: 30.64%
Kotak Multicap Fund
AUM: ₹23,057 Cr
Minimum Investment: SIP: ₹100 & Lumpsum: ₹100
Exit Load: For units in excess of 10% of the investment, 1% will be charged for redemption within 365 days
Investment Philosophy and Strategy: Kotak Multicap Fund invests in sectoral leaders, with a special emphasis of investing in companies that are likely to deliver higher earnings growth than the respective industry in the coming years. The fund offers flexibility to invest a portion in global opportunities, with the ability to invest up to 20% of net assets in foreign securities. The scheme does so only after meeting minimum allocations to large, mid, and small cap equities.
Performance Snapshot:
| Period | Return (%) | Sharpe Ratio |
| 3 Year | 24.69 | 1.07 |
| 5 Year | – | – |
The fund has delivered the strongest returns in its category over the 3-year period, along with good risk-adjusted returns.
Recommended Investment Horizon: 5+ years
Current Allocation: Large-cap: 44.99%, Mid-cap: 28.85%, Small-cap: 26.17%
HDFC Multicap Fund
AUM: ₹19,885 Cr
Minimum Investment: SIP: ₹100 & Lumpsum: ₹100
Exit Load: 1% for redemption within 365 days
Investment Philosophy and Strategy: HDFC Multicap Fund follows a mix of top down and bottom up approach to stock selection with ~60-75% exposure in large and mid caps, and ~25-40% in small caps. The fund focuses on companies which are likely to witness steady and secular growth, or see a turnaround in profitability and have potential of being re-rated. The fund seeks to invest in companies which are leaders and/or are gaining market share due to superior execution, scale, better adoption of technology etc.
Performance Snapshot:
| Period | Return (%) | Sharpe Ratio |
| 3 Year | 21.06 | 0.93 |
| 5 Year | – | – |
The fund has delivered positive returns since the 6-month mark.
Recommended Investment Horizon: 7+ years
Current Allocation: Large-cap: 46.89%, Mid-cap: 26.48%, Small-cap: 26.63%
Nippon India Multicap Fund
AUM: ₹50,352 Cr
Minimum Investment: SIP: ₹100 & Lumpsum: ₹100
Exit Load: For units in excess of 10% of the investment, 1% will be charged for redemption within 365 days
Investment Philosophy and Strategy: Nippon India Multicap’s investment approach focuses on long term outperformance with risk optimization, by:
- High conviction investments with meaningful stakes
- Unique Portfolios to create meaningful difference
- Fundamentally strong company selection, without compromise on valuation or quality, driven by strong internal research
Performance Snapshot:
| Period | Return (%) | Sharpe Ratio |
| 3 Year | 21.66 | 1.08 |
| 5 Year | 22.52 | 1.20 |
| 10 Year | 16.08 | 0.59 |
The fund has delivered higher returns over the 3-year and 5-year periods compared to the 10-year period, indicating relatively better outcomes over moderate holding periods rather than very long-term market phases.
Recommended Investment Horizon: 5 to 7 years
Current Allocation: Large-cap: 44.31%, Mid-cap: 28.16%, Small-cap: 27.53%
Mahindra Manulife Multi Cap Fund
AUM: ₹6,133 Cr
Minimum Investment: SIP: ₹500 & Lumpsum: ₹1,000
Exit Load: 1% for redemption within 3 months
Investment Philosophy and Strategy: Mahindra Manulife Multi Cap Fund positions itself as a well-diversified portfolio of companies that have demonstrated industry leadership and scalability leading to high earnings growth potential. The portfolio aims to tap into emerging growth opportunities from across sectors stemming from under penetration, structural market share shifts and technology driven changes.
Performance Snapshot:
| Period | Return (%) | Sharpe Ratio |
| 3 Year | 22.91 | 1.03 |
| 5 Year | 21.10 | 1.08 |
Recommended Investment Horizon: 5 years
Current Allocation: Large-cap: 39.72%, Mid-cap: 33.44%, Small-cap: 26.85%
Factors to Consider Before Investing in Multicap Funds
Before selecting from the best multicap mutual funds, investors should evaluate the following aspects:
- Investment Horizon: Multicap funds are best suited for long-term goals, typically 5 years or more. Short-term investors may face volatility due to the mandatory exposure to mid and small caps.
- Risk Appetite: While diversified, multicap funds are equity funds and can experience drawdowns, particularly due to the minimum 25% mid and small cap exposure at all times. Understanding your tolerance for volatility is essential.
- Allocation Style: Some multicap funds lean more towards large caps for stability, while others actively seek alpha from mid and small caps. Reviewing the fund’s historical allocation provides clarity.
- Fund Manager Track Record: The ability to manage allocations across market caps effectively is crucial. Experienced fund managers tend to navigate cycles better.
- Taxation: Multicap funds are taxed as equity funds. Short-term capital gains, redeemed before 12 months, are taxed at 20%, while long-term gains are taxed at 12.5%. A mutual fund advisor can help optimize tax efficiency of your investments.
Who Should Invest & Who Should Avoid
Multicap funds are not suitable for every investor. Consider the following before investing:
Who Should Invest:
- Long-term investors seeking diversified equity exposure in a single fund.
- Investors who want participation across large, mid, and small caps at all times without active rebalancing.
- Individuals building a core equity portfolio for wealth creation.
Who Should Avoid:
- Investors with a short-term investment horizon.
- Those uncomfortable with interim volatility.
- Investors seeking guaranteed or low-risk returns.
Conclusion
Multicap funds provide diversified equity exposure across large, mid, and small cap stocks within a single structure, making them relevant for investors looking beyond narrowly focused equity strategies in 2026. Their ability to participate across segments can be valuable in markets where leadership keeps rotating and growth opportunities emerge unevenly.
That said, investors should be aware of the mandatory minimum allocation to mid and small cap stocks, which limits the fund manager’s ability to reduce exposure during periods of heightened volatility or stretched valuations. This structural feature can amplify drawdowns during market corrections and requires investors to remain patient through short-term fluctuations.
Multicap funds are therefore most appropriate for investors with a long-term horizon and sufficient risk tolerance, ideally as part of a broader asset allocation strategy. A mutual fund advisor or mutual fund consultant can help determine whether this inherent exposure aligns with an investor’s financial goals and risk appetite.
Frequently Asked Questions (FAQs) : Best Multicap Mutual Funds
Are multicap funds suitable for SIP investments?
Yes, multicap funds are well suited for SIPs, as systematic investing helps average costs across market cycles.
Are multicap funds riskier than large-cap funds?
Multicap funds typically carry higher risk than pure large-cap funds due to mid- and small-cap exposure, but lower risk than pure small-cap funds.
What is the ideal investment horizon for multicap funds?
A minimum of 7 years is generally recommended to ride out market volatility.
Can multicap funds underperform during certain periods?
Yes, like all equity funds, multicap funds can underperform in specific market phases depending on allocation and market conditions.
Disclaimer: This article is for informational purposes only and should not be construed as investment advice or a recommendation to buy or sell any mutual fund. Mutual fund investments are subject to market risks. Past performance is not indicative of future results. Investors are advised to consult a qualified mutual fund advisor or mutual fund consultant and read all scheme-related documents carefully before investing.
