Mutual Fund Overlap: What It Is and How to Check It

Mutual fund overlap tells you how much two or more funds have in common. If two funds own many of the same stocks, they have high overlap. If they own very different stocks, their overlap is low.

Overlap is not simply about whether two funds own the same companies. The size of their holdings matters too. If Fund A has HDFC Bank at 9% and Fund B has it at 2%, the shared exposure is 2%—the lower of the two weights. Repeat this for every shared stock and add the weights.

This guide is built from primary regulatory sources, not secondary commentary:

• SEBI’s circular on Categorization and Rationalization of Mutual Fund Schemes dated 26 February 2026 (Circular No. HO/24/13/15(2)2026-IMD-RAC4/I/5764/2026), superseding Clause 2.6 of the Master Circular dated 27 June 2024.
• The scheme category definitions and portfolio disclosure requirements in that circular and SEBI’s Master Circular for Mutual Funds.
• AMFI’s published classification of large, mid and small cap companies.

We have not modelled specific fund pairs or named schemes. Any numbers used to explain a concept are clearly illustrative, not measurements of a real fund. Where practitioners disagree about what counts as “too much” overlap, we say so.

Overlap is based on portfolio weights, not just stock names.

Two funds can have similar-looking top holdings and still have meaningfully different portfolios. The opposite can also happen: different names and slightly different top holdings, but much of the portfolio invested in the same companies.

Overlap also cannot tell you why a manager owns a stock. One may hold it as a high-conviction idea; another may simply stay close to a benchmark. Treat overlap as a diagnostic tool, not a complete verdict.

Often, it is not because fund managers are copying one another. Category rules create some overlap by defining minimum allocation requirements and limiting the universe available to managers.

Source: SEBI circular dated 26 February 2026, Clause 2.6.3. Market-cap definitions follow AMFI’s half-yearly list.

Four large cap funds from four AMCs must each invest at least 80% in the same universe of 100 companies. Very low overlap would therefore be unrealistic. A flexi cap fund can also overlap with a large cap fund because large companies offer liquidity and often make up a substantial portfolio share.

There is no SEBI-defined overlap limit for individual retail investors. Claims such as “anything above 40% is dangerous” are rules of thumb, not regulation.

SEBI permits an AMC to run both a Value Fund and Contra Fund only if overlap stays at or below 50%. Sectoral and thematic equity schemes must also keep overlap with other equity schemes below 50%, with large cap schemes carved out of that test. This makes 50% a useful reference—not a magic number for your portfolio.

Illustrative framework anchored to SEBI’s 50% scheme-level reference. It is not a regulatory threshold for investors.

Context matters. A 55% overlap between two large cap funds is not surprising; the same overlap between large and small cap funds would be unusual. High overlap is not automatically bad if it is deliberate. The problem is buying a second fund for diversification when it does not provide it.

Method 1: Check the AMC’s monthly disclosure

Under Clause 2.6.8 of the February 2026 circular, mutual funds must publish category-wise overlap—equity against equity, debt against debt, and hybrid against hybrid—on the AMC website every month. Look under “Disclosures” or “Statutory Disclosures.”

These disclosures are category-wise and scheme-house-wise, so they may not show overlap between funds from different AMCs.

Method 2: Compare monthly portfolios yourself

Every AMC publishes each scheme’s full monthly portfolio on its website and AMFI’s, alongside the risk-o-meter, within 12 days of month-end.

1. 1Use the same monthDownload both portfolio disclosures for the same month.
2. 2Get the two numbersNote each company and its percentage of net assets.
3. 3Match the companiesIdentify companies appearing in both portfolios.
4. 4Take the lower weightFor each shared company, use the lower portfolio weight.
5. 5Add them upThe total is the portfolio overlap percentage.

Two things to watch

Company names may differ. “HDFC Bank Ltd.” and “HDFC Bank Limited” can be treated as separate entries by a simple spreadsheet, understating overlap.

Portfolios change. Monthly data is a snapshot. An actively managed fund can change holdings and weights, so overlap is not fixed forever.

Before deciding whether to keep or remove a fund, consider at least three other factors:

Do not look at overlap and immediately conclude one fund must go. Some investors treat overlap above 50% as possible redundancy. Others accept that overlap is unavoidable in large caps and choose one low-cost index fund instead of several similar active funds. Both can be defensible.

The real problem is not necessarily high overlap. It is owning multiple funds without knowing how much they overlap.

SEBI’s changes go beyond disclosure. Existing sectoral and thematic schemes have three years from February 2026 to come within the 50% overlap limit. Excess overlap must be adjusted in phases: 35% in year one, another 35% in year two, and the remaining 30% in year three. Schemes that still cannot comply will be compulsorily merged.

AMCs also had six months from the circular date to align scheme names and parameters with revised categories. Fund labels should become more meaningful, but some existing schemes may change or merge. It is worth knowing not only how many funds you own, but how different they really are.

• Overlap is calculated using the lower portfolio weight of each shared stock.
• More funds do not automatically mean more diversification.
• Some overlap is structural because category rules constrain the available universe.
• There is no SEBI-defined overlap limit for retail investors.
• AMCs must publish category-wise overlap monthly from February 2026.
• Cross-AMC overlap can be calculated from same-month disclosures.
• High overlap is not automatically bad; unknown overlap is the bigger problem.