SEBI's New 50% Overlap Cap - Which Funds Already Violate It?

In February 2026, SEBI proposed a sharper line for thematic and sectoral mutual funds: if two portfolios overlap too much, investors should not be sold the illusion that they are making distinct bets. The logic is simple. Different fund names do not automatically mean different portfolios.

That matters because thematic funds are exactly where overlap gets hidden most easily. One AMC calls it manufacturing, another calls it business cycles, another frames it as infrastructure or India opportunity. Underneath, many of them still crowd into the same narrow basket of stocks.

The Violators

The table below shows thematic and sectoral active-fund pairs in the current MFXray indexed overlap set that already sit above 50% overlap. These are the combinations where the diversification story breaks down fastest.

Why This Matters

If you hold two funds from this list, you are not getting two clearly separate ideas. You are paying two expense ratios for portfolios with a large common core. In practice, that means weaker diversification, more concentrated risk, and less room for one fund to genuinely offset the other.

What Investors Should Watch

1. Check whether the overlap is coming from a true sector bet or just lazy convergence into the same large names.
2. Watch for AMC portfolio reshuffles if SEBI pushes the rule through in its current form.
3. Consolidate duplicate thematic exposures before adding more SIPs on top of them.

The Bigger Picture

SEBI is targeting the most visible end of the problem, but the broader issue goes beyond thematic funds. Indian mutual funds often cluster around the same liquid names even when the marketing language looks different. Thematic overlap is just the easiest place to prove it.

If your portfolio owns multiple thematic or sectoral funds, the right question is no longer �How many funds do I hold?� It is �How many genuinely different portfolios do I actually own?�

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Data shown here comes from SEBI-mandated monthly portfolio disclosures and MFXray's current indexed overlap dataset.