The market regulator Security and Exchange Board of India (SEBI) has changed the rules for asset allocation for multi cap mutual funds. According to the new rules, now fund houses will need to invest at least 75 percent of their total allocation in equity-related instruments. According to the new rules of SEBI, it is now necessary for the fund house to invest 25-25 per cent in midcap and smallcap. While only 25 per cent will have to be invested in LogCap. Experts say that with this decision of SEBI, there will definitely be an increase in buying in midcap and smallcap stocks ahead.
Before that, the fund had to invest only 65 per cent in equity. At the same time, there was no fixed limit of allocation in Lorgecap, Midcap and Smallcap. Due to this, fund houses were doing most of the allocation in LORGECAP to avoid risk. Whereas in small caps, there was often no investment. In some multicaps, up to 80 per cent investment was in large caps, in some schemes the investment in small caps was zero or extremely low. In view of this, SEBI felt the need to change the rules.
How is the allocation right now
According to brokerage house MK Global, the total AUM of the multi cap scheme is around Rs 1.3 lakh crore. Of this, about 78 percent allocation is in LORGCAP. 16% of the allocation is in midcap and 5% in smallcap. In the remaining instrument.
How much shopping in midcap and smallcap ahead
According to the research of MK Global, now these schemes will have to make a new purchase of 28000 crores in smallcap. At the same time, they will have to buy 13500 crores in midcap. At the same time, they will have to sell about 41100 crores in the large-cap segment. If this happens, it is clear that midcap and smallcap stocks will gain momentum.
Currently, multi-cap schemes are free to choose sectors and market cap. In multicap schemes, the fund manager has the option and they keep increasing the investment in large, mid and smallcap stocks in the portfolio as per the requirement. This flexibility will end after the new rules. With this, fund managers will have to maintain investments in shares of a particular market cap. Then whether they are performing or not.
Which shares can be seen fast
Midcap: Varun Beverages, Ashok Leyland, Max Financial, Vinati Argonics and Crompton Consumer
Smallcap: Iquitas, Dixon, Radico Khaitan, Rallies, Kalpataru Power, KNR Construction and JK Lakshmi.
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