The Mutual Fund Show: No Need To Panic On SEBI Directives On Small, Mid-Cap Funds

There is no need to panic over the Securities and Exchange Board of India's directives to mutual funds to proactively protect investor interest amid "froth" building up in the broader end of the Indian equity market.

However, it's time to reap the benefits of small and mid-cap allocation and rebalance, they said.

Such directives primarily affect investors who are coming in without understanding the market, according to Harshvardhan Roongta, chief financial planner at Roongta Securities Pvt.

If done right, portfolio allocation does not need to change just because there has been a directive from the market regulator, according to Mohit Gang, chief executive officer of Moneyfront.

"As far as we are concerned, there is no change in our portfolio... We have very carefully allocated as much in the mid- and small-caps as the investor can take," Roongta said.

"If you have a small-mid-cap portfolio of Rs 20 and it has run up to Rs 25, then by all means you should take out Rs 5 and rebalance it to some other market cap or some other asset class altogether," Gang said.

"But if you are well within your portfolio limitations, then you don't need to panic, as markets will see bouts of correction. They (investors) should continue building up their corpuses," he said.

"Most of the investors have come into small caps by just seeing the returns in the last two–three years," Roongta said.

For investors who only saw returns and did not do risk analysis, this is a "great time to exit and get profit, even if you have made some mistakes," he said.