Is AMFI guideline on mutual funds' froth building responsible for small-cap, mid-cap crash?
Stock market today: The Indian stock market witnessed sharp selling pressure on Monday as the majority of the indices ended red in the previous session. However, some bottom fishing is being witnessed in the key benchmark indices but the small-cap and the mid-cap indices are still under huge selling pressure.
In the last two straight sessions, the small-cap index has corrected from the 44,653 to 42,751 mark, logging around 1900 points or 4.25 percent crash in this time. Likewise, the mid-cap index has nosedived from 39,852 to 39,312 levels, recording around 1.35 percent dip in two days.
According to stock market experts, selling pressure in the mid-cap and the small-cap indices is mainly due to the market regulator Securities and Exchange Board of India (SEBI) raising concern over the froth building up in small-cap and mid-cap segment, which prompted AMFI to direct mutual funds to go for the stress test and disclose outcome from March 15, 2024. They said that the move is aimed at assessing the time taken to exit the position in a weak market.
Experts went on to add that the move is one of the reasons that has spurt churning in the small-cap and the mid-cap portfolio of mutual funds and they are shifting money in the large-cap quality stocks. However, they maintained that medium to long-term investors need not bother about these developments.
On why small-cap and mid-cap indices are falling, Sandeep Pandey, Founder at Basav Capital said, "Current volatility into the Indian stock market, especially in small-cap and mid-cap segment, can be attributed to the market regulator SEBI's concern raised against the froth building up in the small-cap and the mid-cap segment. This prompted the mutual funds body AMFI to ask AMCs too
. Read more on livemint.com
