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29 Jan 2018

SHARE MARKET--CHECK THE TRUTH


SHARE MARKET IS GOING UP AND UP BUT OUR HOLDING IN MID CAP AND SMALL CAP SHARES GOING DOWN WHY?

This has happened in whole last week because of continuous “fall in midcaps and small caps”. The mid and smallcap mutual fund categories have returned exceptionally in the past one year. Midcap schemes returned 38.49 per cent and smallcaps offered 50.62 per cent in the last one year.
So, Why is this happening?
Fundamentally the valuations are high and prediction of a fall after a prolonged rally are some of the reasons. But the recent fall in mid and small cap is mainly attributed to the announcement by SEBI.
There was an order by SEBI(Securities and Exchange Board of India) for consolidation of various schemes provided by the mutual funds.
And also Sebi specified some rules to define large caps, mid caps and small caps.
Due to this restructuring, all the major mutual funds have to buy more of large cap funds and sell their small caps and mid caps to make the scheme compatible with sebi norms.
They have a time period upto march 2018.
So they will keep buying large caps and keep selling mid n small caps.
So overall the market may look positive but we will have negative impact on portfolios.
Suggestion: “Existing investors” should not worry about the volatility in the space. Such correction will come and go but there is no trigger for a big fall in the mid and small cap space. “New investors” are better off in multi cap schemes as the valuations in the small and madcaps are becoming too high. After March 2018 the position will be changed. So patience is the remedy.


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