The Securities and Exchange Board of India (SEBI) in 2017 had mandated multi-cap funds to allocate its investments to the tune of 65% in equity or equity-related instruments in either large, small or mid-cap funds.
However, the SEBI, through its dated 11 September 2020, has altered the allocation requirement of multi-cap funds. They are now required to diversify their investments to the tune of 25% each in large, small and mid-cap funds.
Currently, the investment portfolio of most multi-cap funds is concentrated in either large-cap or mid-cap funds, thereby disregarding the value of small-cap funds. The rigidifying of the investment norms will ensure that the multi-cap funds stay true to their title and invest equally in each of the three types of funds, respectively.
like HDFC Equity, Kotak Standard Multicap, Motilal Oswal Multicap 35 and others have most of their investments lying in large-cap funds. The gap in the investments between large-cap funds and small-cap funds is wide, and the new norms will ensure that the existing gap is bridged.
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