The Sebi circular on mutual fund schemes’ categorization and rationalization aims to declutter the industry and make it easier for investors to compare schemes of various fund houses
The Securities and Exchange Board of India’s (Sebi) circular on mutual fund schemes’ categorization and rationalization was released on 6 October 2017. The eight-page circular (you can read it here) comes at the end of many years of regulatory nudges. What is the problem that Sebi is attempting to solve? Four problems. One, in the absence of definitions from Sebi on what is a large-, mid- and small-cap category, there has been confusion about what an investor is really buying. A large-cap fund could, therefore, have stocks that would be counted as mid-cap if a different definition was used for shortlisting a large-cap stock. Not just investors, but third-party analysts too found the lack of an industry standard difficult to deal with.