Motilal Oswal AMC Halts Inflows Into Nifty Microcap 250 Index Fund Amid SEBI Categorisation Talks
The scheme follows the Nifty Microcap 250 Index, which is made up of 250 stocks beyond the top 500 companies measured by market capitalisation.
Motilal Oswal Asset Management Company (MOAMC) has halted fresh inflows into its Motilal Oswal Nifty Microcap 250 Index Fund following talks with the Securities and Exchange Board of India (SEBI) regarding mutual fund categorisation rules.
The halt which will be effective Jan. 8, has been put in place due to “micro-cap” not being recognised as a separate category under SEBI’s existing mutual fund classification system.
The scheme follows the Nifty Microcap 250 Index, which is made up of 250 stocks beyond the top 500 companies measured by market capitalisation.
MOAMC stated that it is conferring with the securities body as to how thing will play out going forward.
The asset management firm has ceased the acceptance of all fresh subscriptions and transactions in the meantime, this includes lump-sum investments, systematic investment plans, systematic transfer plans, and other modes.
Any transactions accepted post 3:00 p.m. on Jan. 8 will not be processed and are set to be refunded in accordance with applicable procedures, the fund house stated.
This action will not affect existing investors, the asset management company clarified. MOAMC stated that the fund will procced with being managed in accordance with its stated investment approach, the way it has been handled since the very beginning.
MOAMC will make further announcements regarding this matter once they conclude their talks with SEBI.
Neil Borate, the editor-in-chief of thefynprint and former Personal Finance Editor of The Mint, stated that this move raised more questions than it answered, asking why SEBI provided approval for the fund's launch in 2023 if it didn't recognise its category.
He also asked if it would become an "orphan scheme" and get merged into Motilal Oswaal's Smallcap Fund scheme, naming liquidity risks if it remains an orphan scheme.
He also stated that if it were to be merged, it would pose issues for investors as they would be invested into a different product, he also raised the likelihood of tax implications if they exit the product.
He stated that both SEBI and Motilal Oswal Mutual Fund will need to clarify many aspects of this move.
