After the revised guidelines on multi-cap funds, Motilal Oswal Chairman Raamdeo Agrawal said the best option is to go for a new category called "flexicap" to accommodate existing funds.
Securities and Exchange Board of India (SEBI) on September 11 said multi-cap funds are required to invest at least 25 percent each in large-cap, mid-cap and small-cap stocks.
Speaking to CNBC-TV18, Agrawal said fund managers should be given flexibility in their allocation.
He added that large caps are doing well considering the current status of the Indian economy. According to Agrawal, there should be two categories of funds - large-cap and non-large cap.
The market regulator on September 13 said multi-cap schemes need not necessarily churn their portfolios by selling large-cap stocks or buying small-caps, but can also enable re-positioning, a merger of schemes, or facilitate unitholders' switch to another scheme.
In a release on September 13, Sebi said it was conscious of market stability and that is why it had given the industry time till January 31, 2021, to meet the new minimum limit norms pertaining to multi-cap funds.