Stock Market ALERT! Diwali in small-cap, mid-cap shares coming after big SEBI decision; analyst names top MFs

Stock Market: A big money-making opportunity has just opened for smart investors! The Securities and Exchange Board of India (SEBI) has made it mandatory for multi-cap fund managers to invest 25 per cent of their fund allocation in small-cap and mid-cap stocks. According to stock market experts, the multi-cap mutual funds have a size of Rs 1.4 lakh crore and their net investment in the small-cap and mid-cap stocks is not more than 5 per cent. 

So, in coming times, multi-cap fund managers will be forced to pump around Rs 25,000 crore in the small-cap and mid-cap stocks that will lead to rise in quality stocks of this segment.

Speaking on the impact of this SEBI decision on the small-cap and mid-cap stocks, Varinder Bansal, Co-founder, Pantomath AMC said, "This decision by the market regulator SEBI to make it mandatory for the multi-cap fund managers to invest 25 per cent of their fund into the small-cap and mid-cap stocks is going to bring Diwali for the quality small-cap and mid-cap listed companies."

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Explaining the reason for being so bullish on quality small-cap and mid-cap stocks after this SEBI decision, Bansal said, "The net size of the multi-cap mutual funds is around Rs 1.4 lakh crore and their exposure in the small-cap and mid-cap stocks is not more than 5 per cent. In fact, there are around 10-15 large-cap stocks that used to get maximum investment from the multi-cap fund managers. Now, since it has become mandatory for the mid-cap fund managers to raise their investment from existing 5 per cent to 25 per cent around Rs 25,000 crore additional investment is going to take place in the small-cap and mid-cap stocks."

Know which stocks will benefit?
Bansal told Zee Business that it doesn't mean all small-cap and mid-cap stocks benefit from this SEBI decision and added, "When I say quality small-cap and mid-cap stocks, it means a small-cap and mid-cap stock that has market capital to the tune of Rs 7,000 to Rs 8,000 crore and its PE multiple is at 10-15 per cent."

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SEBI का बड़ा फैसला-मल्टीकैप फंड का 25% मिडकैप, स्मॉलकैप में निवेश जरूरी...वरिंदर बंसल से जानिए क्या है निवेशक के लिए इसके मायने?#SEBI @varinder_bansal @AnilSinghvi_ pic.twitter.com/Sylwfl9JfA

— Zee Business (@ZeeBusiness) September 11, 2020

Top multi-cap mutual funds named
Asked to name a few top multi-cap mutual funds, Bansal said that Kotak Standard, HDFC Equity and Axis Focus are the leading multi-cap mutual funds as their net size is at Rs 30,000 crore, Rs 20,000 crore and Rs 11,000 crore respectively. Bansal said that Kotak Standard has an investment of 0.3 per cent in small-cap and mid-cap stocks while HDFC Equity and Axis Focus has around 4 per cent investment in the small-cap and mid-cap stocks. So, these big size multi-cap mutual fund managers will have to sell their large-cap stock holdings and invest in the small-cap and mid-cap stocks.