'No proposal to SEBI to launch new benchmark index' : AMFI1 min read . Updated: 15 Oct 2020, 11:42 AM IST
Globally, index calculating agencies do prepare customized indices which comply with investment restrictions of the fund.
AMFI has clarified that it has not sent any proposal to Sebi to bring a new index or capping any new index. "Refering to a speculative report in a section of the media about AMFI /AMCs proposing to SEBI to launch a new benchmark index, Association of Mutual Funds in India, (AMFI) has clarified that it has not written to SEBI proposing the launch of new index nor capping any stock in the Index. The industry will continue to adhere to SEBI guidance on the capping of a single stock," says Amfi.
AMFI is the association of SEBI registered mutual funds in India of all the registered Asset Management Companies.
The notice further mentions that whenever any mutual fund launches a scheme, the fund house chooses an appropriate benchmark index which reflects the composition of the scheme's portfolio.
Undoubtedly there are challenges in performance measurement as indices do not have a cap on stock whereas mutual fund schemes have a cap of 10 % on a stock. "However this issue needs to be settled between fund houses and index calculating agencies. Globally, index calculating agencies do prepare customized indices which comply with investment restrictions of the fund," says Amfi.
Securities Exchange Board of India (Sebi), has recently announced a slew of measures for mutual funds industry. The market regulator has modified certain mutual funds rules to make them more transparent and investor friendly. Sebi has tweaked the portfolio allocation rules for multi cap equity mutual fund schemes recently. According to the new rules, multi cap mutual funds will have to invest at least 75% in equities. At present the minimum equity allocation must be 65%. Also, going forward, these schemes will have to invest at least 25% each in large cap, mid cap and small cap stocks. Currently there is no such allocation restriction and fund managers can invest across the market cap as per their own choice.
Sebi has provided time till January 31, 2021 to mutual fund houses to comply with the latest rules, within one month of Amfi releasing the next list of large cap, mid cap and small cap stocks.