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NEW DELHI: Market regulator Sebi (Securities and Exchange Board of India) amended the asset allocation framework on Friday to multicap mutual funds, calling for such funds to have a minimum corpus of 75 percent invested in stocks compared to the current mandate of 65 percent.
In addition, such funds will have to make a minimum investment of 25 percent each in stocks and related instruments of large-cap, mid-cap and small-cap companies, Sebi said in a circular.
All existing multicap funds will ensure compliance with the provisions within one month from the date of publication of the next share list by the industry body Amfi (Association of Mutual Funds in India), i.e. January 2021, added.
“In order to diversify the underlying investments of multicap funds in small, medium and large capitalization companies and be true to the label, it was decided to partially modify the characteristics of the multicap fund scheme,” said Sebi.
Currently, multicap funds must invest 65 percent of total assets in stocks and their related securities.
In addition, there are no restrictions on the exposure that such funds must make in small, medium and small capitalization stocks, so experts believe that most multicap funds have a greater allocation towards large caps and residual exposure in the stocks. mid- and small-cap.
“Now, with this circular in effect, we will see that most funds will increase their exposure to small and mid-caps, while large caps already had the lion’s share,” said Samco Group Director – RankMF Omkeshwar Singh.
Jimeet Modi, founder and CEO of Samco Group, said that the new arrangement will lead to an increase in mid- or small-cap purchases by multicap MF to the tune of Rs 30,000 crore.
This will be a disruption opposite to what we saw in October 2018, when Sebi first introduced schema categorization. That had led to small and medium capital outflows. This time the opposite will happen, he added.
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