Will Sebi's fatwa for multi-cap funds work? Only the market will determine

Sebi's new diktat says multi-cap equity funds must invest a minimum of 75% in equities, up from 65%, with at least 25% each in large-caps, mid-caps, and small-caps

The Securities and Exchange Board of India (Sebi) on September 11 came up with a fatwa. By January next year, multi-cap equity funds must invest a minimum of 75 per cent in equities, up from 65 per cent, with at least 25 per cent each in large-caps, mid-caps, and small-caps. This has sent shockwaves, not just through the fund industry and equity fund investors but the entire equity market. Here is why. Most of the multi-cap money is invested in large-caps. If multi-cap funds are forced to make a 25 per cent allocation each to large-, mid-, and small-caps, they