SEBI Warns Small Cap Investors

09 Mar, 20242 mins read
SEBI Warns Small Cap Investors

Last week in a nutshell

SEBI has given mutual fund houses 21 days to take steps to protect small-cap investors. (Want to know why? Keep scrolling 👇)

India will send 42,000 workers to Israel. According to a declaration given at an Indians for Palestine event, employment openings in Israel are filled by unemployed Indians when Palestinians leave because of the continuous war. 

Tata Motors' intent to split sends its stock price soaring high. Tuesday marked a record high in the stock price of Tata Motors, after the business's announcement that it will split into two public corporations. The stock increased 7.9% to hit 1,065.6 rupees, its all-time high.

Cabinet approves 4% dearness allowance hike for Central govt. employees, pensioners. Commerce Minister Piyush Goyal states that 4.9 million employees and 6.8 million pensioners will benefit from this, costing $1.55 billion annually.

Small Caps are too hot to handle!

Inflow in small-cap funds in India jumped by 86.5% over a 10-month period to ₹2.48 trillion in January and mid-cap funds jumped 58.5% to ₹2.9 trillion. In the last year, the Indian market witnessed a record rally driven by small-cap and mid-cap funds. Funds focused on this saw a remarkable 67% surge in assets, reaching 5.3 trillion last month as compared to the previous year.

SEBI is concerned about the “froth in the market”. Small-cap funds added 78 new stocks to their portfolio, taking the total to 506 by the end of December. This is an increase from 428 in December 2022, as inflows and returns have risen significantly - a serious overheating sign.

SEBI has given suggestions like slowing down investments and protecting investors from sudden withdrawals. But it's up to the funds to decide what to do. They've got 21 days to figure it out

What our expert says

"The recent warning from SEBI regarding small caps highlights the need for caution in this segment. With retail shareholders owning nearly half of the free float market cap, any panic reaction from investors could have significant implications. The Nifty 250 Smallcap index trading at an all-time high with a PE multiple of over 28 indicates heightened investor optimism but also raises concerns about overvaluation. Small caps' rapid growth presents opportunities and risks, especially considering the expensive market conditions, making them vulnerable to price corrections during market downturns."

—Kashish Manjani, Investment Head at Stack Wealth

disclaimer: the information provided in this blog is for general informational purposes only. it should not be considered as personalised investment advice. each investor should do their due diligence before making any decision that may impact their financial situation and should have an investment strategy that reflects their risk profile and goals. the examples provided are for illustrative purposes. past performance does not guarantee future results. data shared from third parties is obtained from what are considered reliable sources; however, it cannot be guaranteed. any articles, daily news, analysis, and/or other information contained in the blog should not be relied upon for investment purposes. the content provided is neither an offer to sell nor purchase any security. opinions, news, research, analysis, prices, or other information contained on our blog services, or emailed to you, are provided as general market commentary. stack does not warrant that the information is accurate, reliable or complete. any third-party information provided does not reflect the views of stack. stack shall not be liable for any losses arising directly or indirectly from misuse of information. each decision as to whether a self-directed investment is appropriate or proper is an independent decision by the reader. all investing is subject to risk, including the possible loss of the money invested.

it’s time to grow your wealth

3 users1+ Lac investors are growing their wealth with Stack.
stack mb