SEBI's chief, Madhabi Puri Buch, has raised concerns over excessive valuations and potential price manipulation in small and mid-cap stocks, highlighting the need for risk management.
Small, mid-caps: Regulation relook?
She has also indicated a willingness to reassess regulations mandating small and mid-cap funds to allocate 65% of assets to these stocks. Her comments come at a time when small and mid-cap shares have outperformed major indices.
MFs act on overheating concerns
Many mutual funds have stopped accepting lump sum investments due to fear of overheating in the segment.
Expert view on SEBI's concerns
On a recent episode of Invest Smat, Avni Raja discussed the issue of 'froth' in small and mid-caps with personal finance expert, Gautam Bhasin of Prospurts Wealth. Talking about the SEBI directive on this issue, he said that the market regulator was concerned about its impact on retail and do-it-yourself (DIY) investors.
Small-cap funds: Investment surge
Bhasin also highlighted the rapid influx of retail investors into small-cap funds, driven by easy access to information and media hype surrounding top-performing funds. He said that SEBI's apprehension stems from the vulnerability of DIY investors who lack professional guidance, potentially facing substantial losses in the event of a market downturn.
Advice for investors
Bhasin added that DIY investors must seek expert advice if they have disproportionate exposure to small-cap funds. He also advised rebalancing of portfolios in such cases.