A few months ago, there was news that SEBI was considering altering the number of stocks in the large- and mid-cap universes. If this happens, fund houses may need a few months to resettle their portfolios. Should I wait because of this before selecting any mutual fund scheme?
No. That's a brief answer. Actually, it doesn't matter much because it's not going to have a substantial difference. One is that if you look at the large-cap, mid-cap and small-cap definitions, as mandated by SEBI, the top 100 companies make large caps, next 150 companies are mid caps and the rest of them are small caps. A large-cap fund can also invest some portion in companies beyond large caps. The same holds true for both mid and small caps. Small-cap funds are supposed to invest only around 65 per cent in small caps and rest in others. So, they have ample flexibility in the first place. Besides, even the current classification system has a provision that if you invested in a mid-cap company and it becomes a large cap, you don't necessarily have to throw it out of your portfolio. You will get time to calibrate your investment and stick around rather than selling it just to comply with the rules. Thus, it's not a very rigid system and rightly so, because, in fund management, various things can happen - the valuations can change, stock prices can go up or even fall dramatically, a large-cap company can become a small-cap company, etc.
Further, I really wonder how exactly the changes will be implemented or what exactly the change will be. Also, it is not going to be a very disruptive thing and it's going to be a very normal tweak.
These are the classifications meant for the pure categories - large, mid and small, which already have ample leeway. Besides, most of the money is in multi-cap, ELSS, value or aggressive hybrid funds, which also have ample flexibility to be wherever they want to be. So, I would say that most investors can do without worrying about this. If you have a plan, don't wait and don't make any excuses - invest now.