India’s markets regulator SEBI has unveiled a new framework for mutual funds, replacing the June 2024 master circular. The guidelines introduce Contra Funds and Sectoral Debt Funds, define “residual portion,” mandate disclosure of portfolio overlaps, and add Life Cycle Funds, aiming to enhance transparency, comparability, and investor confidence.
The Securities and Exchange Board of India (SEBI) has issued a comprehensive update to mutual fund regulations, reshaping scheme categorization and rationalization. This new framework replaces the June 2024 master circular, reflecting SEBI’s continued push for clarity and investor protection in India’s growing mutual fund industry.
Among the key changes, SEBI has defined the “residual portion” as the part of a portfolio not invested in a scheme’s core asset classes. The regulator has also mandated category-wise disclosure of portfolio overlap levels, ensuring investors can better assess diversification.
Additionally, SEBI has introduced new categories such as Contra Funds, which follow contrarian investment strategies, and Sectoral Debt Funds, focusing on specific debt segments. A new Life Cycle Fund category has also been added, designed to align investments with investors’ age and financial goals.
Key Highlights
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Minimum Equity Holding: Set for Dividend Yield, Value, and Contra Funds.
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Transparency: Mandatory disclosure of portfolio overlap levels.
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New Categories: Contra Funds, Sectoral Debt Funds, and Life Cycle Funds.
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Definition: “Residual portion” clarified as non-core portfolio assets.
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Framework Update: June 2024 master circular replaced by new guidelines.
This overhaul underscores SEBI’s commitment to balancing investor protection with product innovation, ensuring mutual funds remain transparent, competitive, and future-ready.
Sources: SEBI Circular (2026), Economic Times, Moneycontrol, TaxGuru