MFs have evolved over the past two decades and have built a historical and comparable performance trail amidst multiple business cycles and ever-changing market conditions. Talking about scale, today, the overall industry has reached a size of Rs 25 trillion, with equity assets of Rs 9 trillion.

On the offerings front, MFs with respective sub-categories, such as large-cap, multi-cap, mid and small-cap portfolios, etc, have witnessed significant divergence in performances. This was predominantly attributed to variation in portfolio composition, construct and lack of uniformity in defining investible market cap universe.

However, the recent categorisation of funds as mandated by Securities and Exchange Board of India, has brought in reasonable amount of standardisation among schemes within each sub-category. Now there appears to be reasonable amount of homogeneity in terms of expected levels of market cap allocations, underlying stock universe, broad nomenclature of schemes and comparable benchmarks, etc. This has reduced the number of funds on offer in each category with overlapping strategies by each fund house and led to the much needed rationalisation of schemes. This has also helped investors choose appropriate funds based on their risk - reward appetite and defined objectives.

In case of MFs, frequent portfolio changes do not impact investors due to realised capital gains, as transactions are done at the scheme level. While, exit from funds would lead to potential capital gains and attract tax basis the holding period.