Mid- and small-cap shares rallied on Monday after market regulator Securities and Exchange Board of India (Sebi) tweaked asset allocation norms for multi-cap mutual funds. The regulator had on Friday asked multi-cap mutual funds to invest a minimum corpus of 75 per cent in equities as against the existing mandate of 65 per cent. On Sunday, it clarified that multi-cap funds must invest at least 25 per cent each in large-, mid- and small-cap stocks. The Nifty Midcap 100 index surged as much as 3.32 per cent, and the Nifty Smallcap 100 as much as 5.56 per cent, during Monday’s session.
“In order to diversify the underlying investments of multicap funds across the large, mid and smallcap companies and be true to label, it has been decided to partially modify the scheme characteristics of multi-cap fund,” Sebi said.
The existing multi-cap funds will have to comply with the new norms within a month, after industry body Amfi (Association of Mutual Funds in India) publishes the next list of stock allocation, i.e. for January 2021, Sebi added.
The capital market regulator made the changes after noticing that some multi-cap schemes had skewed portfolios, with over 80 per cent investments made in large-cap stocks akin to large cap schemes, and the asset allocation to small cap companies by other multi-cap schemes were near zero or insignificant.
Among the mid-cap shares, Syngene was the top gainer, trading 13.5 per cent higher in afternoon deals. Mphasis, City Union Bank, Quess Corp, Ashok Leyland and Prestige Estates traded between 8 per cent and 10 per cent higher.
In the small-cap space, KPIT Technologies jumped the most, climbing up as much as 18 per cent. Indoco Remedies, Persistent Systems, MCX, Blue Star, Awanti Feeds and VIP Industries rallied between 10 per cent and 17 per cent.