Markets

SEBI may tweak norms to ease MF investments in small/mid-cap stocks

PALAK SHAH Mumbai | Updated on February 11, 2020 Published on February 11, 2020

Earlier conditions, seen as being restrictive, had hit investments in these segments

SEBI is likely to relax norms with regard to mutual fund investments in small and mid-cap stocks, during its upcoming board meeting on February 17.

The markets regulator will make it easier for fund managers to pick stocks in the small- and mid-cap segments, sources told BusinessLine.

Curbs on inflows

In 2018, SEBI issued norms on re-categorisation of mutual fund schemes and put out certain criteria that made it difficult for fund managers to invest large sums of money in many small- and mid-cap companies.

SEBI defined large-caps as the first 100 stocks by market-cap, mid-caps as those from 101 to 250, and small-caps as stocks below 251, with half-yearly updates.

With this, the pool suddenly became smaller and mutual funds put curbs on inflows into small- and mid-cap schemes. Almost all the large fund houses put curbs on accepting money in small- and mid-cap schemes.

SEBI will relax these norms to include more stocks under the small- and mid-cap category, a source said.

SEBI Chairman Ajay Tyagi, who completes his term in February and is eligible for another term, had announced a few days ago that the market regulator would re-classify small- and mid-cap schemes.

Restricting investment

Mutual fund managers had complained to the regulator that its norms were restrictive and had taken away their flexibility to invest in the small- and mid-cap segment.

After SEBI’s norms came into effect in 2018, the small- and mid-cap stocks witnessed a massive fall of 60-80 per cent, as mutual funds had to re-adjust their portfolios.

Most stocks are yet to recover from this fall.

 

 

Published on February 11, 2020
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