SEBI points to froth in small and midcap stocks | Top Vip News

There may be pockets of irrational exuberance in Indian stock markets, the markets regulator said on Monday, referring to concerns over inflated valuations of small- and mid-cap stocks and large inflows into mutual funds investing in these segments.

The Securities and Exchange Board of India (SEBI) has suggested that mutual fund trustees consider whether lump sum investments in small and mid-cap funds are appropriate.

It is not appropriate to allow the froth to continue to grow, SEBI Chairman Madhabi Puri Buch said on Monday.

Recently, the markets regulator ordered mutual funds to disclose the results of stress tests of small and mid-cap funds from March 15, to assess the time taken to exit positions in times of stress.

Since the beginning of 2023, the Nifty 100 small cap and 100 midcap have risen 58% and 54%, respectively, outperforming the 23% rise of the benchmark Nifty 50 index.

Despite concerns over high capital inflows into these segments, small caps led the trend among equity mutual fund inflows in February, data from an industry body showed on Friday.

SEBI also said on Monday that it has received feedback that some entities may be misusing the provisions of small and medium enterprise listings. The market regulator is gathering evidence over fears of price manipulation in the segment.

The markets regulator said that an optional T+0 settlement will be introduced from the end of March, giving investors the opportunity to settle their stock market trades on the same day.

The move is aimed at ensuring that markets do not lose competitiveness against any “grey” market, Madhabi Puri Buch said.