In a bid to diversify the underlying investments of multicap funds across the large, mid and small cap companies, Securities and Exchange Board of India (SEBI) on Friday modified asset allocation framework for such mutual funds. The market regulator has asked multicap funds to have a minimum equity investment of 75 per cent as against the current mandate of 65 per cent. According to market analysts, the new regulation will result in movement of funds up to Rs 30,000 crore from largecap to small and medium cap companies.
As per the new guidelines issued by SEBI, multicap funds will now have to maintain minimum investment in equity and equity related instruments at 75 per cent of total assets. Adding to it, funds have to make a minimum investment of 25 per cent each in equity and related instruments of large, mid and small cap companies.
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 Association of Mutual Funds in India (AMFI), that is January 2021, it said.
"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 in a notification.
The decision has been taken to protect the interests of investors in securities and to promote the development of, and to regulate the securities market, it said.
"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.
By Chitranjan Kumar with PTI inputs
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