Small stocks, big risks

Redemption in smallcap funds can create challenges

Arecent exchange of communication between the Association of Mutual Funds in India (AMFI) and the Securities and Exchange Board of India (Sebi) culminated in a letter from the AMFI to asset management companies (AMCs), asking them to plan and implement proactive measures to protect investors with high exposures to smallcap and midcap funds. The AMFI cited Sebi’s concerns about “froth” in smaller stocks and asked fund trustees and unitholder protection committees to implement protective measures and announce them within 21 days on their respective websites. This is unusual. While Sebi is always concerned about risks to investors, buying units is