MFs await Sebi clarity on market capitalisation

THE MUTUAL FUND industry is waiting for the revamp of the existing classification norms that govern specific investment mandates for large-,mid-,and small-cap equity schemes, given a sharp rise in the market cap of small-cap stocks seen from 2017 when these regulations were put in place.

- ANANYA GROVER

Earlier this month, Motilal OswalAsset Management Company paused the acceptance of fresh inflows into the Motilal Oswal Nifty Microcap 250 Index Fund following its consultations with Sebi regarding the alignment of the scheme with prevailing mutual fund categorisation norms, under which micro-cap is not recognised as a separate category.

The scheme was launched with approval from Sebi in June 2023 and managed assets of around %2,600 crore as of early January. It invests in 250 stocks beyond the top 500 companies (Nifty 500) by market capitalisation.

According to an industry participant, the regulator’s concern is luring investors in the name of microcap stocks — it looks very good when they go up but when the market falls, the volume in stocks below the top 500 dries up drastically.