Sebi moves to curb inflows into small- and mid-cap funds
₹5,000 crore($603.05 million), while mid-cap stocks are those with market values of between ₹5,000 crore and ₹20,000 crore. Small- and mid-cap stocks are generally less liquid compared to their large-cap peers. Assets managed by small-cap funds in India vaulted 86.5% over a 10-month period to ₹2.48 trillion ($29.92 billion) as of end-January and mid-cap funds jumped 58.5% to ₹2.9 trillion.
Their assets were not much lower than the ₹2.99 trillion managed by large cap funds. The Nifty small-cap 100 index has surged 74% over the past 52 weeks and the Nifty mid-cap 100 index is up 60.86%, as of Wednesday's close. Those gains far exceed the benchmark Nifty's 26.21% rise over the same period.
"A nudge to institutional investors such as mutual funds will help soothe extraordinary exuberance building up particularly in small and mid-cap stocks," the regulatory official said. Sebi did not respond to an emailed request for comment. The market regulator's communication to money managers about one-off investments is not an official order.
The industry has in the past almost always complied with messages from Sebi. India's mutual fund assets have grown significantly over the years as investors have bought systematic investment plans that make regular contributions towards their portfolios. But domestic investors are also increasingly pumping in one-off, or lumpsum, funds to take advantage of the soaring stock market.
Both the regulator and the asset management industry have made moves recently to tamp down the rapid asset growth. Sebi also wants small- and mid-cap funds to make additional risk disclosure to their investors. The Association of Mutual Funds in India (AMFI), an industry lobby body, has in a letter asked fund houses to
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