New sectoral caps to hit NBFCs, says Kotak Institutional Equities

MFs exposure to non-banks (including PFC and REC) has declined to 36% in May 2019 from 39% in Sept 2018

Market regulator the Securities and Exchange Board of India has reduced the sectoral caps for debt mutual funds to 20 per cent from 25 per cent. It has also reduced the additional exposure limit allowed in case of housing finance companies (HFCs) to 10 per cent from 15 per cent. These changes, however, may not have an immediate impact for the mutual fund industry but will “significantly reduce the financial flexibility” of non-banking finance companies (NBFCs), says Kotak Institutional Equities.

MFs exposure to non-banks (including PFC and REC) has declined to 36 per cent in May 2019 from 39 per