Reclassification Woes And Market Volatility

Indian equity markets have been volatile since February this year. Market has corrected over 10 per cent. Analysts are attributing this volatility to compulsions at international and domestic levels. However, there are certain regulatory measures, which too have added fuel to the fire. SEBI in its October, 2017, circular had announced reclassification of mutual fund schemes. According to the circular, it has defined large, mid and small cap companies as per their market capitalisation. The mutual funds, according to SEBI, would have to rebalance (churning) their portfolios (if required) in line with the updated categories. The required changes were done in the first few months of Financial Year (FY) 2019 and accordingly, Asset Management Companies (AMC) have altered their schemes. It is to be noted that during this alteration, AMCs gave free exit load for withdrawal, which could...