Mumbai: Sebi chairperson Madhabi Puri Buch on Friday said there is “no need” for the capital markets regulator to comment on the steep correction in the small and midcap stocks lately.
Drawing from her statement in March last year on the high valuations in the same stocks, Buch said Sebi had flagged its concerns on the high valuations, when it saw a need for it.
“On mid caps and small caps, I think that at a point in time when the regulator felt the need to make a statement about it, the statement was made. Today, the regulator feels no need to make an additional statement,” she said speaking at an AMFI event here.
Small and midcap stocks are in bear territory lately, with some scrips declining by over 20 per cent in quick succession.
In March 2024, in what is a rare comment from the regulator, Buch had flagged concerns on the high valuations in the two segments.
“There are pockets of froth in the market. Some people call it a bubble, some may call it froth… It may not be appropriate to allow that froth to keep building,” she had said.
Meanwhile, Buch also said that the regulator has no intent to make it compulsory for the fund houses to launch the Rs 250 systematic investment plan launched recently.
When asked about a mutual fund distributor offering heavy incentives on a particular scheme, Buch said the regulator is not keen to intervene in such a scheme but made it clear that any aspects like assured returns would invite action.
She also hinted that Sebi will be taking measures by taking care of the “perverse incentives” in the system which has led to the launch of a slew of thematic schemes by asset management companies.
“Whenever we as a regulator look at this, we ask ourselves what is the root cause of this? Our assessment was that one of the factors contributing to this was an arbitrage between normal schemes and NFOs (new fund offers) since there was no cap. Therefore, there was a perverse incentive to launch more NFOs,” she said.
“We have done a consultation paper, approved by the board, notified. You will start to see the result of the root cause elimination,” Buch added.
The MF industry’s lobby grouping launched three investor centric initiatives at the event, including “Chhoti SIP” which aims at sachetisation of mutual funds for making investments more accessible.
She also launched the MITRA or Mutual Fund Investment Tracing and Retrieval Assistant in order to help heirs inherit investments.
Buch launched the ‘Tarun Yojana’ which seeks to integrate financial literacy into school curricula, equipping young minds with foundational knowledge of investment principles.
