Multicap funds with large AUM may face difficulty in re-shuffling portfolio

There is no need for existing multi-cap investors to panic or take any action, despite the likelihood of higher portfolio risk if the regulations are implemented in their present form.

Over the weekend, market regulator Securities and Exchange Board of India (Sebi) came out with two circulars. On September 11, 2020, it tweaked the asset allocation rules of multi-cap funds, which are now required to maintain minimum 25 per cent exposure in each of the market cap classification - large-cap (top 100 stocks in terms of market cap), midcap (101st to 250th stocks) and small-cap (251st stock and below). This has been done to diversify the underlying investments of multi-cap funds across large, mid-and small-cap companies so that they are true to its label, unlike the current allocation that is