SEBI- Securities and Exchange Board of India, the regulator of the stock market came out with 2 circulars over the weekend. SEBI has bought about a change in the asset allocation rules of multi-cap funds. The classification given by the regulator is that a portfolio shall contain minimum 25% exposure in each of the market cap classification. One’s portfolio shall consist of 100 stocks large-cap (in terms of market cap), 101 to 250th stocks mid-cap and 251st stock and below-small-cap.
The main motive and objective of bringing about this change is to diversify the underlying investment of multi-cap funds. SEBI wants investors to take risks and help investors money grow as well as the other classified companies to also earn money. Due to the current scenario, all the investors have shifted their funds to only large-cap companies in order to play safe.
Even though the media and investors have shown a dissatisfaction sign as this will affect the mutual fund investments too, SEBI replied and told that there is no need of ay chaos, and they will be providing time to the Mutual fund holders in order to re-arrange/make changes in their portfolio till 31st January 2021.
There was a lot of chaos among the mutual fund holder, for answering the various doubts and reducing the chaos, On September 13th SEBI said, “Mutual Funds have many options to meet with the requirements of the circular, based on the preference of their unit-holders. Apart from re-balancing their portfolio in the Multi-Cap schemes, they could inter-alia facilitate the switch to other schemes by unit-holders, merge their Multi-Cap scheme with their Large Cap scheme or convert their Multi-Cap scheme to another scheme category, for instance, Large cum Mid Cap scheme. …. It is reiterated that to achieve the desired objective of True to Label and Appropriate Bench-marking, SEBI will examine proposals of the industry, if any, received in this regard.”
Keeping in mind that certain difficulties will be seen by individuals to analyze the situation and huge broking firms will take time to re-arrange portfolios; thus, SEBI may give some time for adherence.
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