In a move that could dampen hopes of a mid- and-small cap rally, market regulator Securities and Exchange Board of India (SEBI) clarified that complying with the new multi-cap fund rules is not the only option for AMCs. Harsha Upadhyaya, CIO equity at Kotak Mutual Fund, Nilesh Shah, MD of Kotak Mahindra AMC, Manoj Nagpal, MD and CEO of Outlook Asia Capital, S Krishna Kumar, CIO-equity at Sundaram Mutual Fund and Raamdeo Agrawal, chairman at Motilal Oswal Financial Services shared their views and outlook.
“We will do what is right for our unitholders. We have been following a time tested investment process and investment style, we will seek feedback from our set of investors to our partners and see what best we can do within the overall SEBI guidelines,” Upadhyaya said.
Kotak’s Shah said while we agree with SEBI’s guidelines, it has to be balanced with investor interest as well.
“Apart from complying with SEBI’s rules and regulations we also have to manage investor’s money with a view to optimising risk-adjusted return. I am not going to buy small and midcap at any prices irrespective of valuations just to comply with the rules and regulations, I have to manage both,” he said.
When asked about his advice to investors who are holding multi-cap funds, Outlook Asia’s Nagpal replied, “We believe that this regulation injects a lot of risk into portfolios by mandating 25 percent smallcap minimum requirements into multicaps. This is not what the investors have signed up for.”
“Over the last decade we are definitely seeing more companies come into the capital markets. As the economy becomes the large one, you would find a plethora of opportunities and we have seen so much of private equity money going into the new businesses and these typically would probably list as midcaps and become large-caps over a period of time,” said Sundaram’s Kumar.
Speaking about the risk profile of investments, Kumar added, “We have to take into recognition the investors’ risk appetite and also balance the regulation.”
Motilal Oswal’s Agrawal said, “The investment ideas come in different sizes, shapes depending on what is happening in the external environment. I don’t want to think cap-dependent in terms of my ideas. In any case a very limited number of ideas fit into my QGLP process. So the ideas can come from smallcap, midcap or from very large-cap. I want a flexicap kind of arrangement where the fund managers should be given full freedom what ideas, what size and how much he wants to buy in this composition.”
“I think SEBI has been very quick in responding to the request of the industry, AMFI represented and I think they came very quickly before even the markets opened,” Agrawal added.
Watch the video for more