What is portfolio concentration?
A fund can hold 60 stocks and still depend on a handful of them. If the top 10 holdings make up half the portfolio, the fund’s results will mostly follow those 10 companies, whatever the other 50 do. Concentration puts a number on this, so you can compare how spread out a fund really is.
Concentrated funds can do very well when their biggest bets work, and badly when they do not. Spread-out funds behave more like the market. Neither is better in itself, but you should know which one you own.
Two ways to measure it
Top 10 holdings. Add up the weights of the ten largest stocks. It is simple and easy to check against a fund’s factsheet, but it ignores how the rest of the portfolio is spread.
HHI (Herfindahl-Hirschman Index). Square each stock’s weight, expressed as a percentage of the equity portfolio, and add the results. A portfolio with one stock scores 10,000. A portfolio split evenly across 100 stocks scores 100. HHI rewards large single positions heavily, because squaring makes a 9% stock count far more than three 3% stocks.
HHI = Σ (wi)²
wi is each stock’s weight as a percentage of the equity portfolio (0 to 100). The index ranges from near 0 (very spread out) to 10,000 (a single stock).
The effective number of stocks makes HHI easier to read. It is 10,000 divided by HHI: the number of equal-sized stocks that would give the same concentration. A fund with 60 holdings but an effective number of 25 behaves like a 25-stock equal-weight portfolio.
Real concentration across 6 funds
CHART
Share of the portfolio in the top 10 stocks (%) - 6 real funds
Sum of the ten largest equity weights, as a percentage of net assets. Source: AMC monthly portfolio disclosure, 30 Sep 2026.
| Fund | Stocks held | Largest holding | Top 5 | Top 10 | HHI | Effective stocks |
|---|---|---|---|---|---|---|
| SBI Focused | 27 | Bajaj Finance (9%) | 34.3% | 56.9% | 508 | 19.7 |
| Parag Parikh ELSS Tax Saver | 41 | HDFC Bank (7.6%) | 33.2% | 55.7% | 488 | 20.5 |
| ICICI Prudential Value | 60 | HDFC Bank (9.5%) | 33.9% | 51.2% | 417 | 24 |
| Parag Parikh Flexi Cap | 60 | HDFC Bank (7.8%) | 29.5% | 51% | 472 | 21.2 |
| DSP Value | 60 | HDFC Bank (9.5%) | 26.2% | 38.7% | 396 | 25.3 |
| SBI Multicap | 70 | ICICI Bank (3.9%) | 17.3% | 30.1% | 237 | 42.1 |
CHART
Stocks held vs effective number of stocks
The effective number is 10,000 divided by HHI. A big gap between the two means a few holdings dominate.
What the numbers show
The top 10 stocks make up 56.9% of SBI Focused but only 30.1% of SBI Multicap. SBI Focused is built to be concentrated, holding 27 stocks, and its effective number of stocks is 19.7. SBI Multicap holds 70 stocks and has an effective number of 42.1, close to its stock count, so its weights are spread far more evenly.
The largest single position ranges from 3.9% in SBI Multicap to 9.5% in DSP Value. Note that stocks held and effective stocks can differ by a wide margin: several of these funds list 60 holdings but behave like funds of fewer than half that many equal-sized positions.
See What a Fund Actually Holds and Sector Tilts vs Category for how to read a real portfolio disclosure end to end.
What high concentration means for you
A concentrated fund magnifies its manager’s best ideas and its worst. It will usually be more volatile than a diversified peer (see standard deviation) and can lag sharply when its top holdings fall out of favour. It also tends to differ more from the index, which shows up as a higher active share. Holding two concentrated funds that share the same top stocks compounds the problem, so check fund overlap as well.
WHAT THIS MEANS FOR YOU Do not read the number of holdings as diversification. Look at how much sits in the top 10 and at HHI. A 60-stock fund with a heavy top 10 is more concentrated than its stock count suggests, and the sectors behind the top stocks matter too: several of the largest positions in these funds are banks.
METHODOLOGY Weights are the equity holdings each AMC disclosed for 30 Sep 2026 (the largest 50 positions, or all positions where a fund holds fewer), as a percentage of net assets. HHI and the effective number of stocks use these weights re-based to the equity listed, so for funds with more than 50 holdings they are close approximations that ignore a small tail of tiny positions. Source: Punji portfolio holdings (AMC monthly disclosure), equity holdings, direct plans. Not investment advice.