This action from fund houses is being seen recently after market regulator SEBI expressed concern over the valuation of midcap and smallcap shares and suggested limiting inflows in these schemes.
Mutual fund house ICICI Pru AMC has taken a big decision regarding investment in midcap and small cap funds. The fund house has stopped taking lump sum investments in midcap and smallcap funds. Also, a limit has been imposed on investing through SIP and STP. This action from fund houses is being seen recently after market regulator SEBI expressed concern over the valuation of midcap and smallcap shares and suggested limiting inflows in these schemes. Before ICICI Pru AMC, many other fund houses including SBI MF, Tata MF have also stopped investing in small-mid cap schemes.
According to the decision of ICICI Pru AMC, lumpsum investment cannot be made in midcap and smallcap funds of the fund house. Taking investments has been temporarily stopped from March 14 until further notice. No transaction will be done after the cut-off time (3 PM) today (13 March). New or additional purchases have been discontinued.
Why did the fund house decide
Midcap and smallcap stocks have outperformed large-caps. The valuations of midcap and smallcap are quite high. Stopped taking lump sum investments expressing concern over high valuation bubble in small and mid-caps.
Let us tell you, the asset under management (AUM) of ICICI Prudential Small-Cap Fund is Rs 7,415 crore and the AUM of ICICI Prudential Mid-Cap Fund is Rs 5,494 crore. Earlier, other fund houses like SBI MF, Nippon India MF, Kotak AMC and Tata MF have also stopped investing in small-mid cap schemes.
Limit on SIPs/STPs
Fund house ICICI Pru AMC says that investment through SIPs and STPs will continue but a limit has been imposed for this. These include daily limit of Rs 10,000, weekly limit of Rs 50 thousand, monthly limit of Rs 1 lakh, fortnightly Rs 2 lakh and quarterly limit of Rs 6 lakh.
Small/mid-cap: Double returns from largecap in 1 year
| Indices  | 1-year return |
| Nifty | 30% |
| nifty 100 | 34% |
| Nifty Small cap | 63% |
| Nifty Mid cap | 58% |
SEBI had expressed concern
Market regulator SEBI had recently expressed concern about the high valuation of smallcap and midcap shares. Also, money managers were suggested to limit the inflow in these schemes. Last month, SEBI had asked mutual funds to stress test their small cap and mid cap funds. After this, the Association of Mutual Funds in India (AMFI) had instructed the fund houses to submit the stress test report within 15 days. Its first report is expected on March 15.
