Multi-cap and flexi-cap funds give investors exposure to large-, mid-, and small-cap stocks, but their investment mandates differ significantly. While flexi-cap funds can move across market capitalisations without a fixed allocation, multi-cap funds must invest at least 25% each in large-, mid-, and small-cap stocks.
As per the latest SEBI Handbook of Statistics (2025-26), both categories recorded comparable net inflows in FY25. However, the trend diverged sharply in FY26, with multi-cap fund inflows declining to â‚ą33,217 crore, while flexi-cap fund inflows surged to â‚ą89,213 crore.
This means that flexi-cap funds received 2.69x more inflows than multi caps in FY26. Here's what experts have to say on this.
Sriram BKR, Senior Investment Strategist, Geojit Financial Services, explained that investor risk perception could have played a key role.
He noted that multi-cap funds carry exposure to mid- and small-cap stocks, unlike flexi-cap funds, which “generally have a tilt towards large-cap stocks”.
Source: Geojit Financial Services, 1-Year Average Returns ending March (FY returns)
Based on the data shared by Geojit Financial Services, BKR explained that “category-average returns did not show a significant difference between the two categories in FY26, particularly over the short term, which often influences investor decisions.”
However, FY24 saw relatively modest inflows but strong returns of 46.14% for multi-cap funds and 39.13% for flexi-cap funds. Across all these years, multi-cap funds gave better returns than flexi-caps.
Siddharth Maurya, Managing Director, Vibhvangal Anukulara Pvt Ltd, explained that the divergence in FY26 flows reflected “investor preferences rather than simply investors following the path of the highest returns”.
“The greater flexibility to adjust the extent of exposure to different market capitalisations is a key reason why flexi-cap inflows rose in FY26,” Maurya said, citing concerns around volatility and elevated valuations in a recent year.
BKR mentioned that awareness of the two categories has increased since their distinct categorisation in 2021. Investors with higher risk tolerance and return expectations may prefer multi-cap funds because of their mandatory mid- and small-cap exposure.
He further noted that between “March 2022 and March 2026, multi-cap funds' AUM grew 3.65 times, compared with 2.24 times for flexi-cap funds”.
From a diversification and exposure perspective, BKR suggested that multi-cap “can be a better choice” for investors with a 5- or 10-year horizon, rather than holding both.
Maurya explained that a flexi-cap can serve as a “core diversified equity investment” for investors who want the fund manager to choose opportunities across market caps. However, multi-cap funds suit investors seeking disciplined exposure to all three segments irrespective of the market cycle.
Both categories can be held, he added, but “only one is required” because their underlying stocks can overlap.