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Here's why AMFI seeks creation of a new index

Updated : October 14, 2020 07:08 PM IST

Reliance Industries (RIL) shares has seen an over 50 percent rally in 2020 that fund managers say could not be entirely captured in the performance of actively managed large cap funds where the exposure to any single stock is capped at 10 percent. So it remains to be seen, how they would correct this?

According to sources, AMFI in a petition to the Securities and Exchange Board of India (SEBI) could seek creation of a new index wherein the weightage of RIL shares would be capped at 10 percent. The other option was for mutual funds to seek SEBI's permission to allow a single stock exposure limit of up to 15 percent or to the tune of the current weightage of the stock on the index.

However, that could only correct future performance. Hence, a new index which would actively manage large cap funds and correct past performance, would help.

To find out more, watch the video.
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