Multi-cap funds will now have to invest 25% each in large, mid and smallcap stocks

Markets regulator Securities and Exchange Board of India (SEBI) on September 11 announced changes to the constitution of multi-cap funds.

These funds are now required to invest a minimum 75 percent of their total assets in equity and equity related instruments  from 65 percent earlier. As per the new guidelines, multi-cap funds will now have to invest a minimum 25 percent each in large, mid and smallcap stocks.

"In order to diversify the underlying investments of multi-cap funds across large, mid and small cap companies and be true to label, it has been decided to partially modify the scheme characteristics of multi-cap funds," the regulator said in a circular.

At present, there is no restrictions on the exposure such funds need to make in large, mid and smallcap stocks. As of August-end, multi-cap funds managed around Rs 1.46 lakh crore.

All mutual funds (MFs) are required to comply with the latest provisions by the first week of February 2021.