--- title: "Mutual Funds | RupeeCase Learn" description: "AMC structure, NAV calculation, direct vs regular plans, expense ratio drag over 20 years, exit loads, and SEBI 2018 recategorisation." source_url: "https://www.rupeecase.com/learn/path-6/module-6-3-mutual-funds-structure-types-costs" --- Skip to main content [Learn](/learn)›[Path 6: Product Universe](/learn/path-6)›Module 6.3 # Mutual Funds | Structure, Types and Hidden Costs India has over ₹60 lakh crore in mutual fund assets. Most investors don't understand the structure they're invested in | or the costs quietly eating their returns. This module fixes that. TK Tanmay Kurtkoti Founder & CEO, RupeeCase · QC Alpha ⏱ 15 min read ⟳ Updated 15 Jun 2026 ◆ Intermediate Mutual funds are the dominant savings vehicle for Indian households upgrading from FDs and gold. SIPs hit ₹20,000+ crore per month. But the fee structures, plan types, and regulatory categories are genuinely confusing | and the difference between a direct and regular plan, compounded over 20 years, can mean lakhs of rupees on a ₹10L investment. Indian mutual fund industry at a glance, Mar 2026 64 Lakh cr total AUM AMFI Mar 2026 26 Thousand cr monthly SIP AMFI Mar 2026 flow 9.7 Cr unique folios KFintech plus CAMS 36 SEBI standardised categories Oct 2017 circular SEBI MF Regs AMFI NSDL CDSL ## How a mutual fund is structured A mutual fund in India operates as a **trust** | not a company. The structure has four distinct entities: * **Sponsor:** The entity that sets up the fund (e.g., HDFC Bank sponsors HDFC AMC). Must have at least 40% shareholding in the AMC and a sound financial track record. * **Trustees:** A board of trustees who oversee the fund and protect unitholders' interests. Must approve major decisions and ensure compliance with SEBI regulations. * **Asset Management Company (AMC):** The professional investment manager that actually runs the fund | Mirae Asset, SBI Mutual Fund, Axis AMC, etc. The AMC charges the expense ratio. * **Custodian:** Holds the actual securities | registered with SEBI. Prevents the AMC from misusing the assets. This separation of control | sponsor, trustees, AMC, custodian | is SEBI's structural protection for investors. The Satyam fraud of 2009 showed why asset segregation matters. The 4 pillar structure: why your units are safe even if the AMC fails Layer 1 Sponsor Promoter, 40 pct AMC stake Layer 2 Trustees Board, unitholder watchdog Layer 3 AMC Fund manager, charges ER Layer 4 Custodian Holds securities, SEBI registered ## How NAV is calculated NAV (Net Asset Value) is calculated at the end of every business day: | Component | Example | | --- | --- | | Market value of all securities held | ₹1,050 crore | | Add: receivables, accrued income | ₹5 crore | | Less: liabilities, accrued expenses | ₹3 crore | | Net Assets | ₹1,052 crore | | Units outstanding | 100 crore units | | NAV per unit | ₹10.52 | NAV is published daily by AMFI (Association of Mutual Funds in India). When you invest ₹10,000 in a fund at NAV ₹52.60, you receive 190.11 units (₹10,000 ÷ ₹52.60). When you redeem, you receive units × NAV on that day. [AMFI India | NAV History (all mutual funds)](https://www.amfiindia.com/nav-history) Equity AUM mix by category, Mar 2026 Flexi Cap + Multi Cap26% Large Cap22% Mid Cap18% Small Cap14% ELSS + Sectoral10% Index + ETF10% Approximate share of equity scheme AUM. Index plus ETF share is growing roughly 4 percent YoY as investors shift to passive. ## Direct vs regular plans | the most important decision Every mutual fund scheme has two plans: **direct** and **regular**. Same underlying portfolio. Same fund manager. Different expense ratios. * **Regular plan:** Bought through a distributor (broker, bank, platform). The AMC pays the distributor a commission of 0.5 to 1.5% per year, taken from the fund's assets. This shows up as a higher expense ratio. * **Direct plan:** Bought directly from the AMC or via a direct platform. No distributor commission. Lower expense ratio by exactly the commission amount. A typical large-cap fund might have an expense ratio of 1.6% for the regular plan and 0.8% for the direct plan. That 0.8% difference, compounded over 20 years on ₹10 lakh at 12% base return: ₹96.5L Value of ₹10L in direct plan at 12% gross return minus 0.8% expense ratio (11.2% net) over 20 years ₹79.4L Value of ₹10L in regular plan at 12% gross minus 1.6% (10.4% net) over 20 years. Difference: ₹17.1L **₹17 lakh on a ₹10 lakh investment over 20 years** | just from the direct vs regular plan difference. This is not a small number. For any investor doing their own research, there is no reason to use regular plans. Direct plans are equally accessible and identical in every other way. Expense ratio comparison: what 1 percent really costs over 20 years Nifty 50 index ETF (direct) 0.08 Nifty 50 index fund (direct) 0.18 Active large cap (direct) 0.80 Active mid cap (direct) 0.92 Active large cap (regular) 1.60 Active mid cap (regular) 1.95 TER percent per annum, typical Mar 2026 levels. On a 10 lakh SIP over 20 years at 12 pct gross, the gap between 0.18 pct and 1.95 pct is roughly 28 to 32 lakh in terminal corpus. Source: AMFI monthly factsheets. ## SEBI's 2018 fund recategorisation Before October 2017, AMCs had dozens of schemes with overlapping mandates | a fund called "Bluechip" might actually hold mid-caps. SEBI intervened with a circular mandating 36 standardised categories across equity, debt, hybrid, and solution-oriented funds. Each AMC can have only one scheme per category. The key equity categories you need to know: | Category | Mandate | Min. equity allocation | | --- | --- | --- | | Large Cap | Top 100 stocks by market cap | 80% in large caps | | Large & Mid Cap | Top 100 + next 150 | 35% each in large and mid | | Mid Cap | 101st to 250th by market cap | 65% in mid caps | | Small Cap | 251st stock onwards | 65% in small caps | | Multi Cap | All sizes | 25% each minimum in large, mid, small | | Flexi Cap | Any market cap | 65% equity, no cap size restriction | | ELSS (Tax Saver) | Equity with 3-year lock-in | 80% equity, tax benefit u/s 80C | [SEBI Circular Oct 2017 | Categorization and Rationalization of MF Schemes](https://www.sebi.gov.in/legal/circulars/oct-2017/categorization-and-rationalization-of-the-schemes-of-mutual-funds_36199.html) ## Exit loads | the cost of leaving early Most equity mutual funds charge an exit load of 1% if you redeem within 1 year of investment. This is the fund's way of discouraging short-term trading in long-term vehicles. Exit loads are returned to the fund scheme (not to the AMC). After 1 year, most equity funds have zero exit load. Mutual funds vs systematic factor strategies | the RupeeCase view Mutual funds are an excellent starting point | SIPs, diversification, professional management. But most actively managed equity funds in India underperform their benchmark net of costs (SPIVA India reports this consistently). A **factor-based systematic strategy on RupeeCase** sits between passive index funds (low cost, no alpha) and active MFs (high cost, often negative alpha). It's rule-based like a passive fund but factor-tilted to earn the documented factor premia. Direct-plan index ETFs have expense ratios below 0.10%. Our factor strategies target meaningful alpha over those benchmarks. Compare at [invest.rupeecase.com](https://invest.rupeecase.com). TK | The day I moved my family to direct plans In 2017 I sat down with my mother's 6 mutual fund statements. Every single fund was a regular plan. She had been investing since 2009, SIP of 15 thousand a month, 8 years of loyal compounding. I pulled both regular and direct NAV histories side by side on AMFI. The gap between direct and regular over those 8 years was around 11 lakh. Eleven lakh. Not on a hedge fund. Not on some exotic structured product. On the same fund, same manager, same portfolio, different plan code. That afternoon we went to KFintech portal and switched everything to direct plans. If you do nothing else this month, go to your CAMS mailback statement, look at the scheme codes, and if any of them end in "Reg" switch them to direct. There is no argument against this. The distributor commission is not buying you anything. ## Glossary Key terms | Module 6.3 AMCAsset Management Company | the professional investment manager that runs the fund and charges the expense ratio. E.g., HDFC AMC, SBI MF, Mirae Asset. NAVNet Asset Value | the per-unit price of a mutual fund scheme, calculated daily as (market value of assets − liabilities) ÷ units outstanding. Direct planA plan that doesn't pay distributor commission, resulting in a lower expense ratio than the regular plan. Identical portfolio, lower cost. Expense ratio (TER)Total Expense Ratio | the annual cost of running the fund as a percentage of AUM. Charged daily against NAV. Includes management fees, distributor commission (in regular plans), admin costs. Exit loadA redemption fee charged if you exit the fund within a specified period (typically 1% within 1 year for equity funds). Returned to the fund scheme, not the AMC. SEBI recategorisationSEBI's 2017 mandate defining 36 standardised mutual fund categories, requiring one scheme per category per AMC. Eliminated category overlap and misleading scheme names. TK A note from the author Why this matters Mutual funds are how most Indians first encounter the markets, yet few investors truly understand the fee structures, tax implications, and regulatory nuances that quietly erode returns. Knowing the difference between regular and direct plans alone can save you lakhs over a lifetime. This module gives you the structural understanding to make every mutual fund decision with clarity. TK Tanmay Kurtkoti Founder & CEO, RupeeCase · 17 years systematic trading · QC Alpha RC **Want to put this into practice?** RupeeCase is the systematic investing terminal built around everything you're learning here, factor scores, strategy backtests, portfolio construction for Indian markets. [Explore the terminal →](https://invest.rupeecase.com) #### Sources & further reading * → [AMFI India | NAV data, scheme information documents](https://www.amfiindia.com) * → [SEBI | 2017 Recategorisation Circular](https://www.sebi.gov.in/legal/circulars/oct-2017/categorization-and-rationalization-of-the-schemes-of-mutual-funds_36199.html) * → [SPIVA India Scorecard | active fund performance vs benchmarks](https://www.spglobal.com/spdji/en/research-insights/spiva/) * → [NISM Series V-A | Mutual Fund Distributors (official study material)](https://www.nism.ac.in/resources/study-material/) Try the SIP Calculator See how monthly SIP compounding works with real numbers across different return scenarios. [Open Calculator →](/learn/tools.html#sip) ### Quick check, Module 6.3 0 correct · 0 answered ✓ Module complete! Next module unlocked. 🎉 Module 6.3 complete 3 correct. Continue to Module 6.4 when ready. 🎓 Spread the knowledge This course is free. Help someone else learn about Mutual Funds | Structure, Types and Costs, share it with one person who needs this. 📋 Suggested LinkedIn post, copy & paste Just completed Module 6.3 of Tanmay Kurtkoti's free investing course on RupeeCase. Learning about Mutual Funds | Structure, Types and Costs. Completely free at rupeecase.com/learn Copy text Share on X Post on LinkedIn Copy link RupeeCase Terminal Put this into practice Factor strategies, backtesting, portfolio analytics, systematic investing for Indian markets. [Try RupeeCase Terminal →](https://invest.rupeecase.com) Research Lab Qualifier Path 6, Module 3 of 9 done, complete all 9 + path test to unlock [Explore terminal →](https://invest.rupeecase.com) ✅ 6.1→ ✅ 6.2→ 📍 6.3 Mutual Funds→ 6.4 ETFs→ 6.5 → 6.9 [← Previous](module-6-2-ipos-new-listings.html) Previous, Module 6.2 Ipos New Listings Calculator ### Direct vs Regular Plan Cost Regular plans pay distributor commission via higher TER. Direct plans skip the commission. The gap compounds. Initial investment (INR)Monthly SIP (INR)YearsGross fund return (%)Direct plan TER (%)Regular plan TER (%) Quick check, Module 6.3 ## 3 questions. Get 2 right to mark this module complete. 0 of 3 answered ✓ Module complete. Keep going. Up next, Module 6.4 ETFs | How They Work and Why They Matter Creation/redemption mechanism, tracking error, premium/discount to NAV, and the full NSE ETF universe for systematic investors. [Continue →](module-6-4-etfs-how-they-work.html) PRACTICE WHAT YOU LEARNED Try systematic strategies on RupeeCase | free paper trading. 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