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Of these 51 mutual fund schemes, 13 schemes have more than 52 per cent overlap. However, the 13 mutual fund schemes do not include those with assets under management of less than Rs 1,000 crore.
For complying with the new norms, an investment of nearly Rs 76,000 crores has to be shifted from one scheme to another over the next three years. But since SEBI has given a three-year window for the transition, the changes are expected to be gradual, and hence the impact of the new rules on the market is expected to be minimal.
What are SEBI mutual fund overlap rules?
SEBI has issued new guidelines requiring that any scheme in the sectoral/thematic equity category must ensure that portfolio overlap with other equity schemes (across sectoral/thematic and other equity categories, excluding large-cap schemes) does not exceed 50 per cent.
The intent is to reduce unintended duplication, enhance scheme differentiation, and ensure that investors receive distinct portfolio exposure across categories.
SEBI mutual fund overlap: MF schemes with highest portfolio overlap
Quant Mutual Fund – Quant Momentum Fund: 78 per cent overlap with Quant Quantal Fund
Motilal Oswal Mutual Fund – Business Cycle Fund: 75 per cent overlap with Multicap Fund
SEBI mutual fund overlap rules: Impact on market
According to Elara Securities, the stocks with the highest overlap are mostly liquid, large cap shares, making it easier for fund houses to adjust portfolios. Smaller schemes may see portfolio changes to minimise transaction risks and reduce market impact. Since these changes will be implemented in phases, a major market disruption is unlikely.
What does this mean on larger scale?
SEBI’s new framework has also altered the way the categories of equity, debt, and hybrid mutual funds are defined. New categories have been added, while some have also been deleted, and the rules have also become more stringent.
For the investors, the new rules mean more clarity about the schemes, less duplication of schemes under the same house, and more transparency of the portfolio.
For the fund houses, the new rules mean more operational changes, restructuring of the investment strategies, and repositioning of the schemes.
As the name suggests, sectoral schemes invest in the stocks of a particular sector. For example, infrastructure, pharmaceuticals, etc. The funds are invested in the stock market with the aim of investing in sectors with high growth potential. However, because they concentrate on a single sector, these schemes may limit diversification within your overall portfolio.
Thematic schemes invest in sectors, industries, or companies that align with a specific theme or idea.
These schemes are designed to generate long-term wealth by focusing on themes with logical growth potential.
(Disclaimer: The above article is meant for informational purposes only, and should not be considered as any investment advice. ET NOW DIGITAL suggests its readers/audience to consult their financial advisors before making any money related decisions.)
