Keep calm and...

On February 27th, SEBI sent a letter to all AMCs expressing concern at the 'froth building up in the small and mid-cap segments of the market and the continuing flows in the small and mid-cap schemes of mutual funds' and asking for a policy to be put into place to protect investors. The letter stated two requirements for this policy. One is that 'Appropriate and proactive measures are to be taken by AMCs and fund managers to protect investors, including but not limited to moderating inflows, portfolio rebalancing, etc.' And two, 'Steps to ensure that investors are protected from the first mover advantage of redeeming investors'. Although the letter does not spell it out, the specific threats that SEBI is pointing to and the measures that can contain those threats are quite clear. The first point shows that the regulator is worried that if large inflows keep coming into sm