The Securities & Exchange Board Of India issued a clarification circular late last evening standing by their suggested modifications to multicap funds. The regulator modified the multicap category stating that mutual funds could allocate 75 percent of total assets to equity & equity related instruments with a minimum of 25 percent in each large, small & midcap category.
Earlier the multicap funds had flexibility in terms of allocation towards the various market capitalization categories but it was observed that some multicap funds had skewed portfolios and hence a review of the category was done. Multicap funds should essentially have representation from large, small & midcap category said Swarup Mohanty, CEO, Mirae Asset Global Investments India.
The clarification circular also pointed out that the objective was to achieve true to label and appropriate benchmarking. The mutual funds have time till January 2021 to comply to the new norms which is adequate time as per the regulator. It also pointed out the options available to both the mutual funds and unit holders.
Some of the available options listed were – rebalancing the portfolio, switching unit holders to another scheme, merging the multicap fund in to large & midcap fund. There will be increased interest in good quality small & midcap stocks said Sunil Subramaniam, MD & CEO, Sundaram Mutual.