Types of Mutual Funds in India: Equity, Debt & Hybrid
Written by Mariyam Sara
2 min read | Updated on November 25, 2025, 14:57 IST
Mutual funds are great investment options for novice investors and people seeking a passive investment approach. When you invest in mutual funds, you don’t have to worry about researching and analyzing stocks and managing your portfolio. The funds pooled from various investors are managed by fund managers having professional expertise in market analysis, risk management and portfolio construction, among other skills.
Selecting the right type of mutual fund can help you achieve your financial goals as per your investment strategy and risk-bearing capacity. Let us look at the different types of mutual funds you can invest in.
Equity Mutual Fund
An equity fund is a type of mutual fund that predominantly invests in stocks of companies listed in the Indian Stock market. SEBI (Securities Exchange Board of India) has made it mandatory for equity funds to invest 75% of the total funds in equities. Equity Mutual funds involve higher risk due to the volatile nature of stocks.
Since equity mutual funds carry high risk, they also offer high returns to investors willing to bear the risk.
Types of Equity Funds
Equity Funds are further divided into sub-categories:
Market Capitalisation
These equity funds are invested in stocks based on their market capitalization, such as Large cap, Mid-cap, Small cap, Multi-cap cap and Flexi-cap funds. The risk involved in these funds depends on the market cap category it invests in.
Tax Savings ELSS Fund
ELSS Mutual Fund exclusively invests in equities and offers tax benefits as per Section 80 of the Income Tax Act, 1961. When you invest in ELSS funds, your funds will be locked in for a minimum of 3 years and provide a tax rebate of ₹1.5 Lakh.
Sectoral Equity Funds
Sectoral Equity Funds invest in specific sectors such as the IT sector, the Automobile Sector, the Green Energy sector, etc. If you invest in a sector, you face sector-specific risks that impact the NAV of your Mutual Fund units.
Debt Mutual Fund
Debt funds invest in fixed-income securities such as debt and money market instruments. It predominantly invests in assets such as money market instruments, corporate bonds and government securities. Debt Funds carry low risk compared to equities and provide a stable return to risk-averse investors.
Types of Debt Fund
There are different types of debt funds.
Short-term Duration Funds
This fund exclusively invests in short-term securities with a duration ranging from 1 to 3 years. This fund is suitable for investors with low risk appetite and short to medium-term financial goals.
Liquid Fund
Liquid funds focus on low-risk debt securities with high liquidity, suitable for short-term investments and immediate redemption options.
Corporate Bond Fund
When companies require capital to meet their operational expenses, they issue bonds. Corporate mutual funds invest in corporate bonds, which potentially offer higher yields.
Money Market Fund
Money market funds focus on investing in money market instruments, suitable for short-term investments with low risk.
Hybrid Mutual Funds
Hybrid mutual funds invest in both equity and debt securities in a predetermined proportion. Hence, hybrid mutual funds carry moderate risk and offer moderate returns. Hybrid mutual funds are further classified into three categories: Conservative, Balanced and Aggressive Mutual Funds.
Types of Hybrid Mutual Fund
Here are the different types of hybrid mutual funds.
Conservative Hybrid Mutual Fund
Conservative hybrid funds invest 75-90% of the fund into debt instruments and the remaining 10-25% in equities. This hybrid fund is suitable for risk-averse investors comfortable with moderate growth.
Balanced Hybrid Mutual Fund
Balanced hybrid funds invest in debt instruments and equities in equal proportion, attracting investors seeking stability and growth.
Aggressive Mutual Fund
This mutual fund invests predominantly in equities, where 65-80% of the funds are invested in stocks, while the balance is supposed to be invested in debt instruments. Since most of the fund is invested in equities, this fund carries high risk and is suitable for investors with a moderate risk appetite.
Mutual funds are a great investment that offer capital appreciation and secure your future financially. Before selecting a mutual fund to invest in, assess if the mutual fund aligns with your risk tolerance, financial goals and investment strategy.
About Author
Mariyam Sara
Sub-Editor
holds an MBA in Finance and is a true Finance Fanatic. She writes extensively on all things finance whether it’s stock trading, personal finance, or insurance, chances are she’s covered it. When she’s not writing, she’s busy pursuing NISM certifications, experimenting with new baking recipes.
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Upstox is a leading Indian financial services company that offers online trading and investment services in stocks, commodities, currencies, mutual funds, and more. Founded in 2009 and headquartered in Mumbai, Upstox is backed by prominent investors including Ratan Tata, Tiger Global, and Kalaari Capital. It operates under RKSV Securities and is registered with SEBI, NSE, BSE, and other regulatory bodies, ensuring secure and compliant trading experiences.