Sebi raises minimum investment corpus in equities to 75% for multicap funds

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NEW DELHI: Markets regulator Sebi (Securities and Exchange Board of India) on Friday tweaked asset allocation framework for multicap mutual funds, asking such funds to have a minimum corpus of 75 per cent invested in equities as against the present mandate of 65 per cent.
Further, such funds will have to make a minimum investment of 25 per cent each in equity and related instruments of largecap, midcap and smallcap companies, Sebi said in a circular.
All the existing multicap funds will ensure compliance with the provisions within one month from the date of publishing of the next list of stocks by industry body Amfi (Association of Mutual Funds in India), that is January 2021, it added.
“In order to diversify the underlying investments of multicap funds across the large, mid and smallcap companies and be true to label, it has been decided to partially modify the scheme characteristics of multicap fund,” Sebi said.
At present, multicap funds need to invest 65 per cent of total assets in equity and its related securities.
Besides, there is no restriction on the exposure such funds need to make in large, mid and smallcap stocks, therefore, experts believe most of the multicap funds have higher allocation towards largecap, and residual exposure in mid and smallcap.
“Now with this circular in effect, we will see most funds increasing their exposure in mid and smallcaps, while largecap already had lion’s share,” Samco Group Head – RankMF Omkeshwar Singh said.
Jimeet Modi, founder and CEO, of Samco Group said the new provision will lead to increased buying in mid or smallcap by multicap MFs to the tune of Rs 30,000 crore.
This will be a disruption opposite to the one we saw in October 2018, when Sebi first introduced scheme categorisation. That had led to outflows from small and midcaps. The inverse will happen this time, he added.



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