No need to speak on small-, mid-cap valuations now, says SEBI's Madhabi Puri Buch after flagging froth a year ago

Sebi Chair Madhabi Puri Buch

SEBI Chairperson Madhabi Puri Buch on February 21 said that the market regulator does not feel that there is a need now to make a statement on the valuations of small- and mid-cap indices amid a 20 percent decline from their peaks. This comes almost a year after Buch flagged the "irrational exuberance" in the broader markets.

While speaking at an AMFI event in Mumbai, Buch said SEBI had made a statement on small-cap and mid-cap valuations in 2024 as there was a need back then.

SEBI in February 2024 had advised asset management companies (AMCs) to put in place a policy to protect investors in smallcap and midcap segments in light of the froth building up in the broader markets.

In March 2024, the SEBI chief had said, "There are some companies and segments which are being re-rated today which is a good thing. But there are others also where the valuation parameters seem to be off the charts and not supported by fundamentals, which regulators call as irrational exuberance."

Notably, the strong surge in small-cap and mid-cap valuations in 2024 came on the back of a market rally. Sensex had almost touched the 86,000 mark in September. Both BSE Small-cap and mid-cap indices gained nearly 30 percent during the year. However, the markets significantly fell in the following months, and so did the broader markets.

Anirudh Garg, Partner and Fund Manager at Invasset PMS, in an interview to Moneycontrol said that it is now a "compelling investment opportunity" to invest in mid-cap and small-cap stocks after the strong corrections. "Valuations have become attractive, and we are strongly bullish for the next two years," he said.

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