ICICI Prudential Mutual Fund first to restrict flows into midcap fund

The move comes after Sebi raised concerns about the build-up of froth in the midcap and smallcap space

ICICI Prudential Mutual Fund has decided to suspend one-time investments in its smallcap and midcap funds from Thursday, citing expensive valuations. The fund house — which manages over Rs 7,000 crore in its smallcap fund and nearly Rs 5,500 crore in its midcap fund — is the first to place curbs on a midcap fund. It will continue to accept inflows through SIPs, with the maximum investment capped at Rs 2 lakh a month.

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The move comes after the Securities and Exchange Board of India (Sebi) raised concerns about the build-up of froth in the midcap and smallcap space. The regulator had suggested mutual funds take measures like putting restrictions on investments to safeguard investors. 

SBI Mutual Fund, Nippon India Mutual Fund, Tata Mutual Fund, and Kotak Mutual Fund have also placed restrictions on lumpsum investments in smallcap funds. 

ICICI Prudential Mutual Fund said it is placing restrictions considering the elevated valuations. In a note, the fund house added that investment through SIPs is the right approach in the current scenario. 

"Valuations in the mid and small-cap space remain high, however, the long-term story of India remains strong due to stable macros. Thus, we recommend continuing investing in a staggered manner in the schemes. The systematic investment transactions are recurring in nature, and hence the flows can be expected while managing the portfolios," it said.