SEBI Mutual Fund Reforms 2026: Equity Funds Allowed 35% Allocation to Gold, Silver, InvITs and Debt

The Securities and Exchange Board of India has announced changes to mutual fund categorisation norms on February 26, 2026.  

The revised framework allows greater flexibility in equity schemes, introduces new fund categories, and discontinues certain existing schemes. 

Equity Funds Can Allocate 35% to Gold, Silver, InvITs and Debt 

Under the new rules, equity mutual funds may invest up to 35% of their non-core allocation in gold and silver, Infrastructure Investment Trusts and debt instruments.  

This change enables diversification within the permitted structure instead of limiting the allocation to traditional debt holdings. The move forms part of SEBI’s broader rationalisation of scheme categories. 

Portfolio Overlap Capped at 50% for Sectoral Schemes 

Sectoral and thematic equity schemes must ensure that portfolio overlap with other equity schemes does not exceed 50%, except for large cap schemes. Existing schemes have been given 3 years to comply with this requirement.  

In addition, mutual funds must disclose monthly overlap data across equity, debt, and hybrid segments to improve transparency. 

Read More: SEBI to Review Solution-Oriented Mutual Fund Closures and Lifecycle Fund Tax Concerns! 

Value and Contra Funds Permitted Together 

Fund houses can now offer both value and contra funds, provided that the portfolio overlap between the 2 schemes remains within 50%. This ensures distinct positioning of each category within the same asset management company. 

Solution Oriented Schemes Discontinued 

Retirement Funds and Children’s Funds have been discontinued as a separate solution-oriented category. Such schemes will be merged with other schemes having similar asset allocation and risk profiles under the revised framework. 

Life Cycle and Sectoral Debt Funds Introduced 

SEBI has introduced Life Cycle Funds with a minimum tenure of 5 years and a maximum of 30 years, structured in multiples of 5 years. At any time, a mutual fund can have up to 6 such schemes open for subscription.  

In the fixed income segment, sectoral debt funds focusing on sectors such as financial services, energy, infrastructure, housing, and real estate have also been permitted. 

Conclusion 

The revised mutual fund norms allow 35% non core allocation flexibility in equity schemes, introduce Life Cycle and sectoral debt funds, and set portfolio overlap limits to standardise scheme structures and disclosures. 

Disclaimer: This blog has been written exclusively for educational purposes. The securities or companies mentioned are only examples and not recommendations. This does not constitute a personal recommendation or investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.