Why Different Mutual Funds Hold the Same Stocks

This guide is built from primary regulatory and index-provider sources: SEBI’s February 2026 categorisation circular, its October 2021 two-tiered benchmarking circular, AMFI’s half-yearly market-cap classification, NSE Indices’ Nifty 50 factsheet dated 31 August 2026, and the S&P Dow Jones Indices SPIVA India Scorecard for year-end 2025.

We have not named or compared specific schemes, and WorthOS does not yet have client portfolio data to draw on. Combined published figures are labelled illustrative. Where practitioners disagree—on large-cap benchmarks or whether Active Share predicts returns—we say so.

1. Category rules fence in the stock universe

A large-cap fund must invest at least 80% of assets in large-cap companies. Mid-cap and small-cap funds must keep at least 65% in their respective bands. AMFI defines large caps as ranks 1–100, mid caps as 101–250, and small caps as 251 onward, updating the list every January and July.

Every large-cap fund therefore builds most of its portfolio from the same 100 companies. Four funds from four AMCs are, by design, fishing in the same pond.

2. The pool itself is top-heavy

The ten largest constituents made up about 52.9% of the Nifty 50 on 31 August 2026. Financial services alone represented 36.47%.

Source: NSE Indices Limited, Nifty 50 factsheet, 31 August 2026. The total was calculated by WorthOS from published weights. Weights change daily with prices.

3. Every fund in a category is measured against the same yardstick

SEBI’s two-tiered benchmarking rules require the first-tier benchmark to reflect the scheme category. For large-cap funds, that means a broad index such as the Nifty 100 TRI or BSE 100 TRI.

If every manager is judged against nearly the same index, underweighting a heavyweight becomes a loud call. That pressure pulls portfolios toward the benchmark’s biggest names: different managers, same gravity.

4. Beating the benchmark is hard, so many funds stay close

The SPIVA India Scorecard for year-end 2025 found that 84.4% of Indian large-cap funds underperformed the S&P India LargeMidCap over five years and 76.3% over ten years. Some analysts reasonably argue that benchmark is too broad, but earlier reports using the S&P BSE 100 showed a similar pattern.

A fund charging active fees while staying close to its benchmark is often called a “closet indexer.” Two closet indexers in the same category will naturally overlap. Active Share can describe the difference from a benchmark, although later research disputes whether it predicts returns.

5. Big funds need stocks they can trade in size

A fund managing thousands of crores cannot build a meaningful position in a thinly traded company without moving its price. The largest companies are also the most liquid, so as a fund grows, its practical stock universe shrinks toward names other large funds already hold.

SEBI has worked to limit duplication mainly inside a single fund house. Since 2017, each AMC has generally been allowed only one scheme per category, with exceptions including index funds, ETFs, funds of funds and sectoral or thematic schemes.

The February 2026 circular permits an AMC to offer both a value and contra fund only when their overlap stays at or below 50%. Sectoral and thematic schemes must also keep overlap with other equity schemes at or below 50%, with three years for existing schemes to comply.

Funds from the same category tend to overlap most—especially two large-cap funds, or a large-cap fund paired with a Nifty 50 or Nifty 100 index fund. Categories based on separate market-cap bands tend to overlap least.

Structural expectation based on SEBI category rules and AMFI classification—not measured overlap for a real scheme. Reclassification can briefly create crossover between bands.

Take two hypothetical large-cap funds and assume both hold the ten largest Nifty 50 stocks at their index weights from 31 August 2026. Because the weights are identical, their shared exposure from these ten stocks alone is about 52.9%.

That passes the 50% reference used by SEBI for value/contra pairs and sectoral/thematic schemes before counting any stock outside the top ten. Real funds will not hold exact index weights, but this shows why 40%–60% large-cap overlap is not by itself evidence of wrongdoing.

Before changing anything, consider cost, exit loads and capital-gains tax. Shared stocks are not automatically a problem; what matters is whether the overlap was expected and what you pay for it.

1. 1Match the categoryThe category appears on the factsheet and scheme information document. A match usually means a shared stock universe.
2. 2Match the benchmarkTwo funds measured against the same tier-1 benchmark face the same pull toward its largest names.
3. 3Compare holdingsUse monthly portfolio disclosures from the same month and add the lower weight of every shared holding.

• Most overlap between mutual funds comes from structure, not copying.
• Large-cap funds must invest at least 80% in the same 100 companies ranked by AMFI.
• The ten largest Nifty 50 stocks represented about 52.9% on 31 August 2026.
• Shared category benchmarks pull portfolios toward the same heavyweight stocks.
• SEBI limits duplicate schemes within one fund house, not across fund houses.
• Same-category overlap is expected; cross-category overlap deserves closer inspection.