MUMBAI: After raising concerns about the rising froth, or "irrational exuberance," in small- and mid-cap stocks a year ago, Sebi Chairperson Madhabi Puri Buch, whose term ends at the end of this month, has said that she no longer feels the need to comment on the valuations of small- and mid-cap stocks, which have dropped by 20% from their peaks.
Addressing an AMFI event on Friday, Buch mentioned that Sebi had already made a statement about small-cap and mid-cap valuations earlier in 2024, as there was a need for such guidance at the time.
In February 2024, Sebi had advised asset management companies (AMCs) to implement policies to protect investors in the small- and mid-cap segments, as the regulator had observed froth building up in these markets. "There are some companies and segments being re-rated today, which is a good thing. However, there are others where valuation parameters appear to be off the charts and not supported by fundamentals—what regulators call irrational exuberance," she had said at a March 2024 event.
It is worth noting that until September, when the market peaked, small- and mid-cap valuations rose more than the broader market. The Sensex approached the 86,000 mark in September, and both the BSE Small-Cap and Mid-Cap indices gained nearly 30% during the year. However, the markets experienced significant declines in the following months, including broader market downturns, with no clear bottom in sight.
Earlier in the day, Buch launched three strategic initiatives by the mutual fund lobby AMFI: छोटी SIP (Sachetization of Mutual Funds), Tarun Yojana, and Mitra (Mutual Fund Investment Tracing and Retrieval Assistant). She emphasized that these initiatives would play a crucial role in advancing financial inclusion, promoting investor awareness, and simplifying the retrieval of forgotten investments.
These initiatives align with Sebi’s and AMFI’s ongoing efforts to democratize mutual fund investments, ensuring broader participation across diverse segments of society, Buch said.
Although the mutual fund industry has seen robust growth, with assets under management now nearing ₹68 trillion, a significant portion of the population remains outside the formal investment ecosystem due to barriers such as lack of awareness and accessibility constraints.
Buch highlighted the importance of widening investor participation and protection. "Investor participation is key to deepening and broadening financial markets. These initiatives will not only encourage more individuals to start investing, but will also provide essential tools to ensure transparency, security, and ease of access to mutual fund investments."
Navneet Munot, AMFI Chairman, said that mutual funds are a key pillar of financial empowerment, enabling individuals to participate in the nation's growth story. These initiatives aim to make investing not just accessible but also secure, transparent, and aligned with the financial well-being of every citizen.
The छोटी SIP introduces a ₹250 systematic investment plan (SIP), while Tarun Yojana seeks to integrate financial literacy into school curricula. The Mitra platform addresses a long-standing challenge by enabling investors and their legal heirs to identify and recover inactive or forgotten mutual fund holdings, ensuring rightful asset ownership. The first ₹250 SIP was launched by SBI Funds last week.