Under the new rules, such funds will be required to invest at least 75 percent of their funds in shares. At present, this limit is 65 percent. Such funds will have to invest at least 25 percent each in shares and related securities of large, mid and small caps companies.
Securities and Exchange Board of India (SEBI) has changed the asset allocation rules for multicap mutual funds. Under the new rules, such funds will be required to invest at least 75 percent of their funds in shares. At present, this limit is 65 percent. In addition, such funds will have to invest at least 25 per cent each in large, mid and small caps companies’ shares and related securities, Sebi’s circular issued on Friday said.
Industry experts say that the move will divert Rs 30,000 to 40,000 crore from stocks of companies with large market capital to midcap and smallcap companies. The regulator stated that all multicap funds will complete compliance with these provisions within one month from the date of publication of the next list of shares by the Association of Mutual Funds in India (Amphi). The date is January 2021.
SEBI said that the multicap fund scheme has been amended with a view to diversify the investment of multicap funds into large, mid and smallcap companies. Currently, multicap funds have to invest 65 per cent of their total assets in shares and related securities. Apart from this, there is no restriction on investing in large, mid or slocap of these funds. Experts say that because of this, such multicap funds make high allocation in largecap. The remaining investment is done in medium and small-scale market capitalization stocks.