SEBI Revamps New Mutual Fund Rules 2026 – What Investors Need to Know?

India’s capital markets regulator the Securities and Exchange Board of India (SEBI), has introduced a major overhaul of the mutual fund rulebook. The new framework expands fund categories, tightens portfolio classification norms, and permits higher exposure to gold and silver across certain schemes. The reform comes as India’s mutual fund industry has grown to nearly $900 billion, supported by strong domestic inflows.

SEBI Mutual Fund Rules 2026: What Has Changed?

Under the revised SEBI mutual fund rules 2026, the regulator has introduced new fund categories while restructuring existing ones.

The total number of mutual fund categories has increased from 36 to 40.

Newly introduced categories include,

• Life-cycle funds designed for long term investing.
• Sectoral debt funds focused on specific fixed-income themes.
• The overhaul ensures clearer classification, standardized disclosures, and improved transparency across schemes.

SEBI stated that these changes are meant to reduce confusion and prevent duplication in fund offerings within the same Asset Management Company (AMC).

Stricter ‘True to Label’ Regime to Reduce Overlap

A major highlight of the SEBI reform is the enforcement of a stricter “true-to-label” regime.

This means,

• Mutual fund portfolios must strictly align with their declared investment objective.
• Risk parameters must match scheme classification.
• Portfolio overlap between similar categories will be capped.

Overlap Limits Introduced

• Value and contra schemes: Overlap cannot exceed 50%.
• Thematic equity schemes: Maximum 50% overlap, except large-cap schemes.
• Asset managers must publish monthly overlap disclosures.
• Thematic funds have three years to comply, while other schemes must comply within six months.

This move aims to prevent duplication of similar funds under different names within the same Asset Management Company (AMC).

Solution Oriented Schemes Discontinued

SEBI has discontinued solution oriented schemes with immediate effect.

Existing schemes must,

• Stop fresh subscriptions.
• Merge into similar schemes with comparable asset allocation.
• Seek regulatory approval for mergers.

However, SEBI continues to mandate a minimum 80% equity allocation for dividend yield, value, and contra funds.

Increased Exposure to Gold and Silver in Mutual Funds

One of the most significant changes in the SEBI mutual fund reform is the expanded scope for gold and silver investments.

What’s New?

• Equity schemes can allocate a residual portion to gold and silver instruments.
• Hybrid schemes can invest in gold and silver ETFs.
• Life-cycle funds can invest up to 10% in gold and silver ETFs, ETCDs and InvITs.
• The “residual portion” refers to the remaining corpus after fulfilling the core asset allocation requirement.

Previously, only certain multi-asset funds were permitted to invest in gold ETFs. The new rule standardizes exposure across equity and hybrid mutual fund schemes.

Why Gold and Silver Exposure Matters

Gold and silver are considered diversification assets, especially during volatile equity markets.

By allowing regulated exposure to precious metals, SEBI provides investors with,

• Better risk diversification
• Portfolio stability during market swings
• Structured exposure within defined limits

Importantly, these changes preserve each scheme’s core identity while formalising precious metal allocation.

Industry Impact and Market Significance

India’s equity mutual funds have seen inflows of over ₹12.02 trillion in the last five years.  Domestic investments have helped cushion volatility caused by fluctuating foreign capital flows.

The revised SEBI mutual fund rules aim to,

• Strengthen investor protection
• Improve transparency
• Reduce portfolio duplication
• Enhance standardized disclosures

The reform reflects SEBI’s broader effort to streamline India’s rapidly growing mutual fund ecosystem.

Question

Q. SEBI increased the number of mutual fund categories from 36 to,

A) 38
B) 39
C) 40
D) 42