Sebi tells mutual funds to protect smallcap investors from market froth
Sebi has told mutual funds (MFs) to frame a policy to protect the interest of investors of small and midcap schemes.
In a letter to the Association of Mutual Funds in India (AMFI), Sebi said in the context of froth building up in small and midcap segments of the market and the continuing flows in the small and midcap schemes of mutual funds, trustees, in consultation with Unitholder Protection Committees of AMCs, shall ensure that a policy is put in place to protect the interest of all investors.
In the letter, Sebi said that AMCs should take appropriate and proactive measures to protect investors, including but not limited to moderating inflows, portfolio rebalancing, etc.
Steps should also be taken to ensure that investors are protected from the first mover advantage of redeeming investors, it said while directing that the policy should be approved and disclosed on each AMCs' website within the next 3 weeks.
The regulator's directive, which was communicated to all MF houses, sparked selling pressure in the market with the Sensex falling over 800 points while Nifty also fell 1% to give its hold on the 22,000-level.
Indices related to smallcap, midcaps and microcaps fell over 2% as Sebi's directive may reduce the pace of flow of funds in the broader market.
Also Read: Sensex plunges 800 points, smallcaps bleed most. 6 factors behind Rs 6 lakh crore crash
In the last year, smaller stocks have led the upside on Dalal Street to make the market capitalisation of all BSE-listed stocks closer to the $5 trillion
