Sebi, in a circular, announced on Friday a new set of portfolio allocation rules for multi-cap mutual funds where the Market Regulator made it mandatory for multi-cap funds to invest a minimum of 25% of their portfolio each in stocks. large cap, mid cap. and small-cap companies. To comply with the new rules, fund managers will need to reduce their large-cap shares and increase the mid- and small-cap shares in their multi-cap schemes by January of next year. Analysts are expecting a rally in small and mid-cap stocks around this event.
“We will see a rebound in the mid- and small-cap space in about a year due to accelerated buying by mutual fund houses to comply with new portfolio allocation rules,” said Sunil Subramaniam, Managing Director of Sundaram Asset Management in a YouTube video. Uploaded by AMC.
So which companies will buy these fund houses? Any guess?
Well, Abhimanyu Sofat, head of research at IIFL Securities, believes that mutual fund houses will primarily buy the stocks that they are comfortable with. He said: “Multi-cap funds can increase the allocation primarily toward their existing small and mid-cap holdings to meet portfolio allocation rules.”
Sofat spoke in a video uploaded to YouTube by IIFL Securities.
Sofat named some mid-cap stocks that could see more buying from mutual fund houses around January of next year. Among the mid-cap stocks, AU Small Finance Bank, Jubilant FoodWorks, SRF ltd, Bharat Electronics, Ramco Cements, Balkrishna Industries, Power Finance Corporation, TVS Motors, Voltas, Crompton Greaves Consumer Electricls and REC are some of the main existing holdings. by fund houses that can see more buying from AMCs, “Sofat said. As a result of the improvement in buying in these stocks, a big rally can be seen in these mid-cap stocks.
Among small caps, Sofat believes there could be a rise in stocks within the market cap between ₹3,000 crore and ₹7,000 crore.
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