29-Feb-2024
2 mins read
SEBI has raised concern about the froth building up in the Mid and small-cap mutual funds segments. The Association of Mutual Funds of India (AMFI) has directed trustees of asset management companies to set measures to protect investors’ interest in small and mid-cap funds.
There have been continuous inflows in the small and mid-cap funds schemes. Trustees, in consultation with Unit Holder Protection Committees of AMCs to ensure that the policies are to be made to protect the interest of retail investors.
SEBI also asked Trustees of mutual funds to look into the appropriate and proactive measures but not limited to portfolio rebalancing or moderate inflows.
The market regulator also directed MF trustees to consider steps to ensure that investors are protected from first mover advantage of redeeming investors.
Mutual fund trustees are given 21 days to form policies and put them on their respective fund houses’ websites.
Small-cap and Mid-cap Funds Inflows
In January 2024, the inflows into the small-cap funds had increased to Rs 3,257 crores against Rs 1,393 crore in December. Meanwhile, the mid-cap inflows, up by 48% , stand at Rs 2,061 crore against Rs 1,393 crore.
The AUM of small-cap schemes increased by 89% to Rs 2.48 lakh crores in January compared to Rs 1.31 lakh crore in the same period last year. The mid-cap AUM rose by 58% to Rs 2.90 lakh crore compared to Rs 1.83 lakh crore in the same period.
The valuation in the small cap space looks high and expensive. The nifty small-cap 250 index is trading at a one-year forward PE multiple of 28 times, while its long-term average PE is at 22.