‘Valuation Concerns’: ICICI Prudential Halts Lump Sum Flow Into Small, Mid Cap Schemes

‘Valuation Concerns’: ICICI Prudential Halts Lump Sum Flow Into Small, Mid Cap Schemes

The move comes after the Securities and Exchange Board of India (Sebi) red-flagged build-up of froth in the midcap and smallcap space.

ICICI Prudential Mutual Fund will not be accepting any fresh investment via lumpsum mode in its smallcap and midcap funds from Thursday. The fund house, the first to place curbs on a midcap fund, cited valuation concerns for the move.

It will, however, continue to accept inflows through SIPs, with the maximum investment capped at Rs 2 lakh a month.

The move comes after the Securities and Exchange Board of India (Sebi) red-flagged build-up of froth in the midcap and smallcap space.

The regulator had suggested mutual funds take measures such as putting restrictions on investments to safeguard investors.

SBI Mutual Fund, Nippon India Mutual Fund, Tata Mutual Fund, and Kotak Mutual Fund have also placed restrictions on lumpsum investments in smallcap funds.

ICICI Prudential Mutual Fund said it is placing restrictions considering the elevated valuations. In a note, the fund house added that investment through SIPs is the right approach in the current scenario.

“Valuations in the mid and small-cap space remain high, however, the long-term story of India remains strong due to stable macros. Thus, we recommend continuing investing in a staggered manner in the schemes. The systematic investment transactions are recurring in nature, and hence the flows can be expected while managing the portfolios,” it said.

SEBI chairperson Madhabi Puri Buch said there are pockets of “froth” in small and mid-cap stocks which appear like “irrational exuberance” to the capital markets regulator. Buch also said that SEBI has evidence, pointing to signs of “price manipulation” in the small and medium enterprises (SME) segment, and asked investors to be more cautious while investing in the risky segment.