Pockets of irrational exuberance in small and midcaps, says SEBI chief Madhabi Puri Buch

Pockets of irrational exuberance are visible in small and midcaps, said SEBI chief Madhabi Puri Buch

Several companies have seen valuations rise in the small and midcap space. While certain pockets appear to be experiencing a favorable re-rating, others seem to be displaying signs of irrational exuberance, said SEBI chairperson Madhabi Puri Buch on March 11.

"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," said Buch.

The SEBI chief's comment comes days after the capital market regulator advised that mutual funds should put in place a policy to safeguard the investors in these schemes, given the froth building in small and midcap stocks.

SEBI instructed mutual funds to dig deep into their small-cap and midcap funds’ portfolios to gauge how liquid they are and how volatile they are compared to their benchmarks, among many other such indicators.

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In her address at an AMFI event in Mumbai, Buch also said that SEBI has noticed signs of manipulation in the SME segment. "The market has given its feedback. We are working on robust evidence and feedback for action."

Moreover, she stated that the SEBI has been monitoring price manipulation instances at the IPO, trading level with regards to some IPOs. "Looking to implement disclosures as a starting step with respect to SME IPOs," Buch said.