Sebi multicap fund rules: ‘Expect healthy returns in mid- and small-cap funds'1 min read . Updated: 12 Sep 2020, 01:06 PM IST
- This will also lead to more inflows in mid cap and small cap funds now
- The multi cap mutual fund category manages assets worth ₹1.46 lakh crore as on August 31
Sebi has tweaked the portfolio allocation rules for multi cap equity mutual fund schemes on Friday. 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. Mutual funds have been told to abide by the new rules by January end next year. While all these changes happen in multi cap funds, the investors of mid and small cap funds tend to benefit indirectly. How..?
“The good news for people who have invested in mid and small cap funds is that they will see the prices of their holdings going up due to accelerated buying in mid and small cap space by the multi cap funds in January next year. We will see a rally in the mid and small space," says Sunil Subramaniam, Managing Director, Sundaram Asset Management in a YouTube video uploaded by the AMC.
Subramaniam further explains that the existing mid-and small-cap fund investors who have not had a very good experience since the December 2017 market peak, will see healthy returns on mid and small cap funds over the next year. He adds, “This will also lead to more inflows in mid cap and small cap funds now."
Abhimanyu Sofat, Head of Research at IIFL Securities believes that mutual fund houses will mostly buy the stocks with which they are comfortable. He said, “The multi cap funds may increase the allocation mostly towards their existing mid and small cap holdings going further to comply with the portfolio allocation rules." Sofat gave a list of 11 mid cap stocks which are expected to rally due to buying by the AMCs.
Multi cap fund category is the biggest category among the equity-oriented mutual fund schemes with a 19% share in the actively managed equity-oriented schemes, along with large cap category which also constitutes the similar share of 19%, followed by mid cap (11.53%) and large & mid cap categories (7.5%). The multi cap mutual fund category manages assets worth ₹1.46 lakh crore as on August 31.