Not all mutual fund investors are successful. What? You might be thinking, “I am relying on a fund manager’s skillset and not picking individual stocks myself, so why can’t I do well?”
The answer lies in “concentration”. Your portfolio may be heavily invested in a single market cap, sector, or theme. This exposes you to cyclical fluctuations and reduces your ability to offset losses.
Now, to avoid this, many investors intelligently diversify. They spread their investments across different market caps, sectors, and fund types rather than putting most of their money into one product. With Tata Mutual Fund™, you can easily achieve this “layered diversification” by investing in a wide range of schemes.
Want to know how this works? Read this article to first understand the need for diversification and then learn how to build a multi-pronged investment strategy. Lastly, you will check out some Tata Mutual Fund™ schemes you may consider for your portfolio.
Table of Content
Why Diversification Across Market Cap, Sector, and Index Is Important?
Diversification means spreading your investments across different types of asset classes, market capitalization, sector, companies, and industries. It may reduce overall portfolio risk because not all parts of the market perform the same way at the same time.
Most mutual fund investors try to develop a “multi-pronged strategy”. In it, they combine these three layers to diversify:
Market Capitalisation
Sectoral/Thematic funds
Index Funds
Each layer aims to diversify your investments. Let’s see how they help:
1. Market Capitalisation Funds
When you invest across large, mid, and small-cap funds, you may create a better balance between potential growth and relative stability. Let’s see how:
| Type of Fund | What It Invests In | What is the Investment Strategy? | What is the Risk Level? |
| Large Cap Fund | Shares of the top 100 biggest companies (by market capitalisation) | Focuses on mature businesses with strong market presence and profitability. | Less risky compared to Mid & Small Cap |
| Mid Cap Mutual Fund | Shares of companies ranked between 101st to 250th by market capitalisation | Targets companies in their “expansion phase” with potentially rising profits and market share. | High Risk compared to Large Cap & Less risk compared to Small Cap |
| Small Cap Fund | Shares of companies ranked 251st and below by market capitalisation | Invests in companies with high growth potential (but unpredictable performance). | Highest risk compared to Large & Mid Cap |
2. Sectoral or Thematic Funds
These funds focus on particular industries like:
Technology
Pharma
Infrastructure
Energy, and more.
Each sector performs differently depending on market conditions. If one sector is performing well (for example, technology is growing), your investments in that area could yield comparatively better returns. At the same time, if another sector (say, energy) is underperforming, the strong performance of tech may offset the losses from energy.
So, by having exposure to multiple sectors, you can offset portfolio gains with losses (instead of depending on just one sector/theme of the market).
3. Index Funds
Index funds track a market index like the Nifty 50, BSE Sensex, etc. They do not try to outperform the market; instead aims to provide returns, before expenses similar to the benchmark, subject to tracking error. This layer anchors your portfolio and may offset the higher risk of active funds.
Tata Mutual Fund Schemes™ You May Consider in 2025
So now you know that by bringing together all three layers (market cap funds + sectoral funds + index funds), your money is not tied to the performance of a single company, sector, or fund type. With this mix, you can try to reduce the effect of market fluctuations on your portfolio.
Okay, but where can I invest? Tata Mutual Fund™ runs multiple investment schemes that you may consider for your diversification needs. Below are some options you may consider:
Disclaimer: In all the schemes mentioned below, there is no assurance or guarantee that the investment objective of the scheme will be achieved. The scheme does not assure or guarantee any returns and / or capital invested.
Tata Mid-cap Fund
An open-ended equity scheme predominantly investing in mid-cap stocks
| Inception | Benchmark | Exit Load | Scheme Risk | Benchmark Risk |
| 1 July 1994 | Nifty Midcap 150 TRI |
| Very High Risk | Very High Risk |
The Tata Mid Cap Fund is an equity mutual fund that invests predominantly in equity & equity related instruments of growth oriented mid cap companies . Its investors may benefit from capital appreciation over the long term.
The fund’s performance is compared against the Nifty Midcap 150 TRI, which represents 150 companies ranked from 101st – 250th based on market capitalisation.
Tata Nifty Midcap 150 Index Fund
An open-ended fund replicating/tracking the Nifty Midcap 150 Index (TRI)
| Inception | Benchmark | Exit Load | Scheme Risk | Benchmark Risk |
| 15 June 2025 | Nifty Midcap 150 Index (TRI) | 0.25% of the applicable NAV, if redeemed on or before 15 days from the date of allotment | Very High Risk | Very High Risk |
The Tata Nifty Midcap 150 Index Fund is a passive mutual fund that track & replicate the performance of the Nifty Midcap 150 Index (TRI), subject to tracking error. This index represents 150 companies (companies ranked 101st to 250th) based on market capitalization.
The fund does not try to beat the market; instead, it invests in the same stocks and in the similar proportion as the index. This scheme may suit investors who want exposure to mid-cap companies through a low-cost passive scheme + diversified route.
Tata Small Cap Fund
An open-ended equity scheme predominantly investing in small-cap stocks.
| Inception | Benchmark | Exit Load | Scheme Risk | Benchmark Risk |
| 12 November 2018 | Nifty Smallcap 250 Index TRI |
| Very High Risk | Very High Risk |
The Tata Small Cap Fund is an equity scheme that primarily invests in small-cap companies. For those unaware, these are classified as small-cap by the Securities and Exchange Board of India (SEBI) or the Association of Mutual Funds in India (AMFI). At present, the small-cap category represents the 251st company onwards in terms of full market capitalisation.
This financial product may allow investors to enjoy long-term capital appreciation by identifying early-stage businesses that might grow over time. Its performance is compared against the Nifty Smallcap 250 Index, which tracks 250 small-cap stocks across different sectors.
Tata India Consumer Fund
An open-ended equity scheme investing in the Consumption-Oriented Sector.
| Inception | Benchmark | Exit Load | Scheme Risk | Benchmark Risk |
| 28 December 2015 | Nifty India Consumption TRI | 0.25% of the NAV of redeemed/switched out before 30 days from the date of allotment | Very High Risk | Very High Risk |
The Tata India Consumer Fund is an equity scheme that invests at least 80% of its funds in equity & equity related instruments of the companies that are a part of India’s “consumption-oriented sectors”.
The fund’s performance is measured against the Nifty India Consumption TRI.
It covers a mix of industries that depend on local demand, such as but not limited to:
- FMCG (consumer goods)
- Healthcare
- Automobiles
- Telecom
- Pharmaceuticals
- Hotels
- Media
Together, these companies represent a majority of India’s domestic consumption. So, when people in India buy more goods and services (expansionary phases), the companies in this index may perform better.
Tata Digital India Fund
An open-ended equity scheme investing in the Information Technology Sector.
| Inception | Benchmark | Exit Load | Scheme Risk | Benchmark Risk |
| 28 December 2015 | NIFTY IT (TRI) | 0.25% of the NAV of redeemed/switched out before 30 days from the date of allotment. | Very High Risk | Very High Risk |
The Tata Digital India Fund is a sectoral equity scheme that invests at least 80% of its net assets in equity/ equity related instruments of the companies in Information Technology Sector. The fund’s performance is compared with the Nifty IT Index. This fund allow investors to participate in the potential growth of India’s technology industry.
Tata Nifty Midcap 150 Momentum 50 Index
An open-ended scheme replicating/tracking NIFTY Midcap 150 Momentum 50 Index.
| Inception | Benchmark | Exit Load | Scheme Risk | Benchmark Risk |
| 20 October 2022 | Nifty Midcap150 Momentum 50 Index (TRI) |
| Very High Risk | Very High Risk |
The Tata Nifty Midcap 150 Momentum 50 Index Fund is a passive scheme that mirror the performance of Nifty Midcap 150 Momentum 50 Index. This index aims to track the performance of top 50 mid-sized companies selected from the Nifty Midcap 150 based on their normalised momentum score.
In this index, each company is given a “Normalised Momentum Score,” which is calculated using its 6-month and 12-month price returns. These returns represent how much the stock price has increased during these periods (adjusted for volatility).
After calculating these scores, the index selects the top 50 companies based on high normalised momentum score. . Each stock’s weight in the index depends on both its momentum score and its free-float market capitalisation.
Tata Nifty Capital Markets Index Fund
An open-ended scheme replicating/tracking Nifty Capital Markets Index (TRI).
| Inception | Benchmark | Exit Load | Scheme Risk | Benchmark Risk |
| 7 October 2024 | Nifty Capital Markets Index (TRI) | 0.25% of the applicable NAV, if redeemed on or before 15 days from the date of allotment | Very High Risk | Very High Risk |
The Tata Nifty Capital Markets Index Fund is another passive scheme that tracks/ replicate the Nifty Capital Markets Index (TRI), which represents companies in India’s capital markets sector.
These companies are drawn from the broader Nifty 500 Index. Now, to select the companies, only businesses that fit the capital market theme are considered. From these, the largest 20 stocks are chosen based on their 6-month average free-float market capitalisation.
Conclusion
So now you know that diversification is a must-have when it comes to investing! By spreading investments across different types of funds and sectors, you may reduce overall portfolio’s volatility.
If you want to build a multi-pronged strategy, you may consider these three layers of financial products:
Market capitalisation funds (large, mid, and small caps) for growth potential
Sectoral or thematic funds with an aim to capture potential opportunities in specific industries.
Index funds to gain low-cost + broad market exposure.
These layers can be included in your portfolio through systematic investment plans (SIPs) or lump-sum purchases. For this purpose, Tata Mutual Fund™ offers multiple options that support diversification and offer sectoral exposure. Some schemes you may consider are:
Tata Midcap Fund
Tata Nifty Midcap 150 Index Fund
Tata Small Cap Fund
Tata India Consumer Fund
Tata Digital India Fund
Tata Nifty Midcap 150 Momentum 50 Index Fund
Tata Nifty Capital Markets Index Fund
*Mutual Fund Investments are subject to market risks, please read all scheme related documents carefully.
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