It can hold both…they are usually called balanced funds, for example check this - http://www.moneycontrol.com/india/mutualfunds/mfinfo/portfolio_holdings/MHD002
Thanks Karthik… got one more question. can we decide how much to pump into debt and how much in equity or the fund specifies that? basically, i am talking abt the mix. can i say i want to invest 60% in eq and balance 40% in debt or the fund specifies these percentages?
If you want a custom split like 60-40, you can do it yourself by parking 60% in pure equity and the balance 40% in pure debt. However the balanced funds have a pre fixed ratio, which is dependent on the fund’s scheme.