SEBI rules on Multicap Funds Allocation


Staff member
I doubt this readjustment rally will last for than a week.

SEBI has given time till January 31st for mutual funds to adjust their portfolios.

It is unlikely that mutual funds will invest large amounts into mid-caps and small caps where liquidity is a major issue especially in bear phases.

Many schemes may prefer to merge with large cap schemes or just return the funds to investors.
Frankly, I think it is a good move by Sebi. When I hear multi-cap, I would assume that the fund invests almost equally in large, medium and small caps - but that is not the case today. Of course, I should read the offer document and check what they actually invest into, but not everyone does that. If multicaps are going to invest in mostly large caps, then why not merge them into the large cap funds?

Some multicaps will survive and will be purely multicaps, rest will merge into largecaps. I think such a consolidation is good and more transparent.
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I think SEBI must create a "flexible fund" category in addition to the current categorisations.

This new category should let fund managers do whatever they want.

Investors can choose these funds based on their risk profile.