SEBI Gives Clarification on Multi-cap Funds Rules

SEBI Gives Clarification on Multi-cap Funds Rules

SEBI Gives Clarification on Multi-cap Funds Rules

SEBI proposed new investment rules for the Multi-cap Funds. On Sunday, SEBI discussed with the Mutual Fund house for the multi-cap funds re-allocation rules. According to the news, MFs have multiple possibilities to go along with Multicap funds rules. On Friday, the market regulator said that multi-cap funds have at least 25 percent of the portfolio in each category. Now, they have to buy more stocks in the mid and small-cap categories and decrease their large-cap portfolio. Moreover, these funds will have to grasp the new rules by the end of January 2021.

On Sunday, SEBI explained the Multicap fund rules. In the early, MFs had 65% in equities. Now, the equity portfolio increased to 75% from 65% in early. Moreover, the multi-cap operators to invest equally in large, mid, and small-cap stocks.

According to the news, MF analysis expects some multi-cap funds to merge with large-cap stocks. Moreover, they also felt that a huge rush will occur in small and mid-cap stocks on account of Sebi’s new rules. However, the market regulator declared that stocks to be observed as a limit rush in the next days.

As of the new norms circular, Sebi’s Friday instruction had sent the mutual fund industry into step as they were considering several possibilities to go along with the new rule. These involved merging existing well-performing funds with another, which could have destroyed investor interest. And then launching another fund in the multi-cap term that would be in line with the regulatory directives. The other option that officials at fund houses considered were to merge small-cap funds with multi-caps.

Expert View

As per the expert analysis, the domestic financial house maintained 35 multi-cap schemes. At present, these schemes managing assets worth of Rs 1.5 lakh crore. As per the asset allocation, It has 65 percent of assets in large-cap stocks and 16-18 percent in midcap, and up to 9 percent in smallcap stocks. 

Besides, In today’s trading, market analysts observed a huge rush in mid and small-cap shares. They declared that the MF managers will be required to buy these stocks before January. This move will offer the best returns to the investors and traders. For example, if investors buy small or midcap stocks and sell at a good value when the fund managers come to buy small or midcap stocks.

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