An equity fund is a mutual fund scheme that invests predominantly in equity stocks.
In the Indian context, as per current SEBI Mutual Fund Regulations, an equity mutual fund scheme must invest at least 65% of the scheme’s assets in equities and equity related instruments.
Under the tax regime in India, equity funds enjoy certain tax advantages (such as, there is no incidence of long term capital gains tax on equity shares or equity funds which are held for at least 12 months from the date of acquisition). As per current Income Tax rules, an "Equity Oriented Fund" means a Mutual Fund Scheme where the investible funds are invested in equity shares in domestic companies to the extent of more than 65% of the total proceeds of such fund.
An Equity Fund can be actively managed or passively managed. Index funds and ETFs are passively managed.
Equity mutual funds are principally categorized according to company size, the investment style of the holdings in the portfolio and geography.
The size of an equity fund is determined by a market capitalization, while the investment style, reflected in the fund's stock holdings, is also used to categorize equity mutual funds.
Equity funds are also categorized by whether they are domestic (investing in stocks of only Indian companies) or international (investing in stocks of overseas companies). These can be broad market, regional or single-country funds.
Some specialty equity funds target business sectors, such as health care, commodities and real estate and are known as Sectoral Funds.
IDEAL INVESTMENT VEHICLE
In many ways, equity funds are ideal investment vehicles for investors that are not as well-versed in financial investing or do not possess a large amount of capital with which to invest. Equity funds are practical investments for most people.
The attributes that make equity funds most suitable for small individual investors are the reduction of risk resulting from a fund's portfolio diversification and the relatively small amount of capital required to acquire shares of an equity fund. A large amount of investment capital would be required for an individual investor to achieve a similar degree of risk reduction through diversification of a portfolio of direct stock holdings. Pooling small investors' capital allows an equity fund to diversify effectively without burdening each investor with large capital requirements.
The price of the equity fund is based on the fund's net asset value (NAV) less its liabilities. A more diversified fund means that there is less negative effect of an individual stock's adverse price movement on the overall portfolio and on the share price of the equity fund.
Equity funds are managed by experienced professional portfolio managers, and their past performance is a matter of public record. Transparency and reporting requirements for equity funds are heavily regulated by the federal government.
A FUND FOR EVERYONE
Equity funds are very popular amongst the retail investors among various categories of mutual fund products. Whether it’s a particular market sector (technology, financial, pharmaceutical), a specific stock exchange (such as the BSE or NSE), foreign or domestic markets, income or growth stocks, high or low risk, or a specific interest group (political, religious, brand), there are equity funds of every type and characteristic available to match every risk profile and investment objective that investors may have.
WHAT ARE DIFFERENT CATEGORIES OF EQUITY FUNDS
There are different types of equity mutual fund schemes and each offers a different type of underlying portfolio that have different levels of market risk.
Large Cap Equity Funds
Mid-Cap Equity Funds 
Small Cap
Multi Cap Equity Funds
Diversified Equity Funds
Thematic Equity Funds