Deccan Chronicle

Multi Cap funds have to keep 50% assets in mid & small cap from Feb.


The Securities and Exchange Board of India has issued asset modificati­on guidelines for floating multi-cap funds, making it mandatory for the funds to invest minimum

25 per cent assets in midcap and small-cap stocks.

Mutual funds have to ensure compliance by the first week of February

2021, Sebi said.

The Associatio­n of Mutual Funds in India (Amfi) will publish the next list of stocks according to market capitalisa­tion criteria in early January, ensuring compliance within one month by the multi-cap funds..

In a circular issued on Friday evening, Sebi said, “In order to diversify the underlying investment­s of Multi Cap Funds across the large, mid and small cap companies and be true to label, it has been decided to partially modify the scheme characteri­stics of Multi Cap Fund.”

According to the circular, minimum investment in equity & equity related instrument­s, up to 75 per cent of total assets, will have to be equally divided among equity & equity related instrument­s by size of the stock. i.e, 25 per cent of total assets in large-caps, 25 per cent in mid-cap companies and 25 per cent small-cap companies.

“All the existing Multi Cap Funds shall ensure compliance with the above provisions within one month from the date of publishing the next list of stocks by AMFI, i. e.

January 2021,” Sebi said.

Joseph Thomas, head of research, Emkay Wealth Management, said, "At present, the multi cap funds have almost 70 per cent of their allocation to large-cap stocks and the balance to mid-cap and small-cap stocks. The new regulation will make it mandatory that any market cap may have a minimum allocation of 25 per cent, and therefore, to the extent of the excess allocation to large-caps mutual funds will have to reduce the allocation, that is, 20 per cent, and move into mid-caps and small caps. An amount equivalent to Rs 35 000 crore will move out of large-caps and will move into mid and small caps. This move will help mid-cap and small-cap stocks to move up.”

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