Even as the mutual fund industry plans to seek more time from SEBI to comply with its new regulations on multicap funds, it is already working on alternative ways to meet the new norms. These include creating a new category called flexi funds and merging schemes to protect investors from any possible negative fallout.
SEBI has made it compulsory for multicap funds to invest 25 per cent each in large-, mid- and small-cap stocks besides increasing the equity exposure to 75 per cent from 65 per cent. SEBI has directed mutual funds to comply with new norms by February.
Until now, to beat the benchmark index, the muticap funds were heavily loaded on top 5-6 companies. These funds had a nominal investment in mid- and small-cap. “It has recently been observed that some multicap schemes have skewed portfolios, with over 80 per cent of investment in large-cap stocks akin to