Market Regulator May Widen Stock Universe for India Mutual Funds
The move that will grant money managers the flexibility to invest in a wider set of stocks
(Bloomberg) -- India’s markets regulator plans to revise the definition of large- and mid-cap shares for mutual funds, a move that will grant money managers the flexibility to invest in a wider set of stocks.
“We are actively looking at that,” Ajay Tyagi, chairman of the Securities & Exchange Board of India, told reporters in Mumbai on Monday. “We will come out with some changes soon,” he said.
Broadening the ambit of mid-cap stocks will help balance the playing field in a highly polarized market, where a handful of large companies have kept the main equity indexes in record territory despite the sharp slowdown in Asia’s third-largest economy.
In 2018, Sebi defined large-caps as the first 100 stocks by market value, mid-caps as those from 101 to 250, and small-caps as stocks below 251, with half-yearly updates. The aim was to help standardize classification across funds and make comparison easier for investors.
In reality, the reclassification forced mutual funds to re-adjust their portfolios, which extended the underperformance by mid- and small-cap stocks. The S&P BSE MidCap Index posted two straight years of losses after more than doubling over 2014-2017 period. The gauge is up about 4% this year, but a long way away from reclaiming its 2018 peak.
Indian money managers hold 27 trillion rupees in assets across stocks, bonds and money-market funds.
--With assistance from Rahul Satija.
To contact the reporter on this story: Ronojoy Mazumdar in Mumbai at rmazumdar7@bloomberg.net
To contact the editors responsible for this story: Lianting Tu at ltu4@bloomberg.net, Ravil Shirodkar, Karthikeyan Sundaram
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