If you invest in mutual funds, then this news is very important for you. Because the regulator SEBI (SEBI-Securities and Exchange Board of India) on Friday changed many rules related to mutual funds. Let’s know everything about it …
Mumbai. The market regulator SEBI (SEBI-Securities and Exchange Board of India) has issued new rules regarding the midcap category of mutual funds. According to the new rules, a multicap fund will have to invest 75 per cent of the total amount in the stock market. Till now its limit was 65 percent. Also, out of this 75 percent amount, 25 percent will have to be invested in largecap stocks. At the same time, 25 per cent midcap and 25 per cent will be invested in smallcap stocks. Investors of the stock market will benefit greatly from this decision. Let us tell you that the new rules will be applicable from January 2021.
What are mutual funds?
If put in easy words, money of many investors is deposited in mutual funds at one place. Then a fund manager invests in the stock market and elsewhere such as government bonds etc. Mutual funds are managed by asset management companies (AMC). Each AMC usually has several mutual fund schemes.
SEBI changed which rules of mutual funds?
According to the new SEBI circular, a multicap fund (which invests in shares of midcap companies) will have to invest 75 per cent of the total amount in the stock market. Till now its limit was 65 percent. Also, out of this 75 percent amount, 25 percent will have to be invested in largecap stocks. At the same time, 25 per cent midcap and 25 per cent will be invested in smallcap stocks. Investors of the stock market will benefit greatly from this decision.
What are midcap funds?
As the name suggests, midcap mutual fund schemes invest in medium-sized companies. They have the potential to become a large-sized company. Of course, there is more risk and volatility with them. But, higher returns can also be expected from them. However, if you cannot take too much risk, nor invest in the long term, then it is better to invest in relatively low risk options like largecap or multicap.
How do you know which company is midcap?
In terms of market cap, the first 100 companies of the stock market are called large caps. In this list, between 101 and 250 companies are kept in the midcap category. At the same time, companies beyond 251 are placed in the list of smallcaps.
What will be the effect of money invested in mutual funds, know the opinion of experts
What will be the effect on investors due to this decision of SEBI?
Experts say that the new circular shows its better label regarding multi-cap. At present, the majority of these funds are large-cap. This is why it becomes difficult to differentiate between multi-cap and large-cap. Currently, on an average 70 per cent of multi-cap stocks are large-cap. This figure is 22 percent for mid-cap and 8 percent for small-cap. However, it is being speculated that in the short term there may be a problem of liquidity in mid and small-caps. Because, now fund managers will increase investment rapidly. In such a situation, low liquidity (low turnover in shares) can increase the tension of the manager.