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What will be the impact of SEBI's new mandate for the multi-cap category on multi-cap index funds?

Index funds belong to a separate category as per SEBI classification and hence there would be no impact on them, informs Ashutosh Gupta.

What will be the impact of SEBI's new mandate for the multi-cap category on the multi-cap index funds? Will they also have to allocate minimum 25 per cent each of their corpus to large-, mid- and small-cap stocks?
- Harendra Pratap Singh Raghuwanshi

Well no, there would be no impact on the index funds which are managed in a multi-cap style and which follow a broader market index like BSE 500. They would not be subjected to the revised investment mandates for the multi-cap category that SEBI has prescribed. In fact, strictly going by the SEBI classification of funds, index funds are a separate category altogether. They are not clubbed with multi caps and therefore, there is no impact.

But more broadly, I'd say, for the users of Value Research Online, there are several other categories which we club under multi-cap as one set which will not get impacted because of this rule. These include categories such as focused funds, the fund of funds (FoFs), index funds - as I've already mentioned, and certain solution-oriented products like retirement plans or child-care plans. We club all these funds together to facilitate better comparison because for most of these products, the underlying universe from which they make the stock selection is the same. They have otherwise pretty similar attributes and are largely meant for similar investment needs. That's why we bunch them up together in our classification of multi-cap funds to facilitate comparison, as essentially they compete for the same share of an investor's wallet.

But if we go strictly by the SEBI classification, all of these are separate categories and in these categories, the revised investment mandate of multi-cap funds will not apply.

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