{"id":12701,"date":"2020-11-05T07:41:00","date_gmt":"2020-11-05T07:41:00","guid":{"rendered":"\/blog\/?p=12701"},"modified":"2025-06-17T12:03:35","modified_gmt":"2025-06-17T12:03:35","slug":"with-the-new-sebi-rules-are-multi-cap-funds-worth-the-risk","status":"publish","type":"post","link":"https:\/\/www.tatacapitalmoneyfy.com\/blog\/investment-guide\/with-the-new-sebi-rules-are-multi-cap-funds-worth-the-risk\/","title":{"rendered":"With the new SEBI rules, are Multi-cap funds worth the risk?"},"content":{"rendered":"\n<h2 class=\"wp-block-heading\"><strong>Introduction<\/strong><\/h2>\n\n\n\n<p>Multi-cap funds are\nthe result of a diversification in mutual funds, allowing for investing in\nfunds across various market caps. Recently, the Securities and Exchange Board\nof India (SEBI) has introduced new policies and guidelines for investing in multi-cap\nfunds. As a result, investors have been forced to ponder and reassess the risk\nof multi-cap funds. This article will provide a breakdown of the newly\nintroduced SEBI guidelines, aiming to assess whether&nbsp;investing in multi-cap\nfunds is still a risk worth taking for investors.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>The new SEBI guidelines<\/strong><\/h2>\n\n\n\n<p>Prior to the revamp,\nSEBI rules possessed no guidelines or limits for which industry and which\nsegments of the industries multi-cap funds can invest in.&nbsp; According to\nthe 2017 rules, there existed no market cap-based limits or requirements for multi-cap\ninvestment firms. This however, is no longer the case.&nbsp;<\/p>\n\n\n\n<p>As per new SEBI\nguidelines, multi-cap funds are now mandatorily required to invest a minimum of\n75% of their total assets in the form of equity instruments, and at least 25%\nis required to be invested across various small, large and mid-cap stocks. Most\nMulti-cap funds were investing largely in large-cap stocks as getting high returns\nfrom mid-small cap stocks has historically been more challenging.&nbsp; SEBI\u2019s\naim in modifying the guidelines for multi-cap funds is to ensure a diversified\ninvestment portfolio for the funds, forcing them to live up to the \u2018multi-cap\u2019\nname.&nbsp;<\/p>\n\n\n\n<p style=\"color:red\"><strong>Additional Read:<\/strong> <a href=\"https:\/\/www.tatacapital.com\/blog\/investments\/5-biggest-fears-related-to-financial-planning\/\">5 biggest fears related to\nfinancial planning<\/a><\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" loading=\"lazy\" width=\"770\" height=\"400\" src=\"\/wp-content\/uploads\/2020\/11\/sebi-rules-2.jpg\" alt=\"New SEBI rules for multi-cap funds: worth the risk?\" class=\"wp-image-12703\" srcset=\"https:\/\/www.tatacapitalmoneyfy.com\/blog\/wp-content\/uploads\/2020\/11\/sebi-rules-2.jpg 770w, https:\/\/www.tatacapitalmoneyfy.com\/blog\/wp-content\/uploads\/2020\/11\/sebi-rules-2-300x156.jpg 300w, https:\/\/www.tatacapitalmoneyfy.com\/blog\/wp-content\/uploads\/2020\/11\/sebi-rules-2-768x399.jpg 768w\" sizes=\"(max-width: 770px) 100vw, 770px\" \/><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>What does this mean for the investor?<\/strong><\/h2>\n\n\n\n<p>The new guidelines\npose a number of advantages for those investing in multi-cap funds. Given the\nnew guidelines, investors will know exactly where and how much is being\ninvested by a multi-cap fund, allowing them to make a more informed decision\nwith their investments and reduce the risk of multi-cap funds.&nbsp;<\/p>\n\n\n\n<p>Currently, all multi-cap\nfunds enjoy what can essentially be described as free reign in the market. They\nare allowed to choose which companies they wish to invest in, how much they\nwish to invest in these companies and what percentage of their investment\nportfolio lies in which sector (large, mid or small cap).&nbsp; The new\nguidelines would end up confiscating these luxuries from multi-cap funds,\nforcing them to maintain a certain dictated amount of investments in each\nsector.&nbsp;<\/p>\n\n\n\n<p>There are a number\nof possible outcomes from the new rules. Multi-cap funds that are not able to\nsucceed and follow guidelines could potentially aim to change their investment\nfund type and identify as focused fund. If this does happen, investors might be\nweary of the increased risk of multi-cap funds due to the difficult task of\nmaintaining a high-risk diversified portfolio.&nbsp;<\/p>\n\n\n\n<p>The second possible\nscenario is that the multi-cap fund adheres to these guidelines. A detailed\nunderstanding of the investment practices and success rates of the multi-cap\nfund is required to assess whether they will be able to succeed in the mid and\nsmall cap segments. If the investor trusts the multi-cap fund, then they might\nchoose to go ahead with their investment. Others might aim to avoid the risk of\nmulti-cap funds, resulting in them no longer investing in multi-cap funds.&nbsp;<\/p>\n\n\n\n<p><strong>Additional Read:<\/strong> <a href=\"https:\/\/www.tatacapitalmoneyfy.com\/blog\/investment-guide\/the-smart-approach-to-your-first-financial-plan\">The SMART approach to your first financial plan<\/a><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Conclusion<\/strong><\/h2>\n\n\n\n<p>The SEBI guidelines have caused multi-cap funds and those investing in multi-cap funds alike to reassess their strategies. From an investors point of view, it has increased the study and knowledge required by the investor about the firm in order to make a good investment. These additional steps could be perceived as the result of an increased risk in multi-cap funds.&nbsp; <\/p>\n\n\n\n<p>Successful investments, regardless of the sector, price or industry, depend on the ability of the investor to study and pick the right stocks to invest in, multi-cap funds or otherwise. If you are looking to invest in multi-cap funds, or a plethora of various other investment options, the Tata Moneyfy&#8217;s <a href=\"https:\/\/play.google.com\/store\/apps\/details?id=com.tatacapital.moneyfy&amp;hl=en_IN\">mutual fund investment app<\/a> is a one stop shop for investments, helping you compare various Mutual funds and prepare a resilient and high performing portfolio that helps you meet your financial needs and goals. <\/p>\n\n\n\n<div class=\"wp-block-button aligncenter\"><a class=\"wp-block-button__link has-vivid-cyan-blue-background-color has-background wp-element-button\" href=\"https:\/\/play.google.com\/store\/apps\/details?id=com.tatacapital.moneyfy\">Apply Now<\/a><\/div>\n","protected":false},"excerpt":{"rendered":"<p>Multi-cap funds are the result of a diversification in mutual funds, allowing for investing in funds across various market caps.  <\/p>\n<p><a href=\"https:\/\/www.tatacapital.com\/blog\/investments\/with-the-new-sebi-rules-are-multi-cap-funds-worth-the-risk\/\">Read More<\/a><\/p>\n","protected":false},"author":1,"featured_media":12704,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"inline_featured_image":false,"footnotes":""},"categories":[68],"tags":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v21.5 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>With the New SEBI rules, are Multicap Funds worth the risk? - Tata Capital Blog<\/title>\n<meta name=\"description\" content=\"This article discusses the impact of new SEBI guidelines on the risk factor of multi-cap fund investments.\u00a0Read here for more information on Multi-cap funds!\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"With the New SEBI rules, are Multicap Funds worth the risk? - Tata Capital Blog\" \/>\n<meta property=\"og:description\" content=\"This article discusses the impact of new SEBI guidelines on the risk factor of multi-cap fund investments.\u00a0Read here for more information on Multi-cap funds!\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.tatacapitalmoneyfy.com\/blog\/investment-guide\/with-the-new-sebi-rules-are-multi-cap-funds-worth-the-risk\/\" \/>\n<meta property=\"og:site_name\" content=\"Moneyfy Blog\" \/>\n<meta property=\"article:published_time\" content=\"2020-11-05T07:41:00+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2025-06-17T12:03:35+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.tatacapitalmoneyfy.com\/blog\/wp-content\/uploads\/2020\/11\/sebi-rules-1.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"770\" \/>\n\t<meta property=\"og:image:height\" content=\"400\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"admin\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"admin\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"4 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.tatacapitalmoneyfy.com\/blog\/investment-guide\/with-the-new-sebi-rules-are-multi-cap-funds-worth-the-risk\/\",\"url\":\"https:\/\/www.tatacapitalmoneyfy.com\/blog\/investment-guide\/with-the-new-sebi-rules-are-multi-cap-funds-worth-the-risk\/\",\"name\":\"With the New SEBI rules, are Multicap Funds worth the risk? 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