Limits on Multi-Cap Fund Investments

  • IASbaba
  • September 17, 2020
  • 0
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Limits on Multi-Cap Fund Investments

Part of: GS Prelims and GS-III – Investment

In news

Key takeaways

  • A multi cap fund will be required to invest a minimum of 75% of its total assets in equities and equity-related instruments.
  • At present, the rule is to invest a minimum of 65% in equities.
  • Minimum investment of 75% has to be allocated in between large cap companies, mid cap companies and small cap companies, with a minimum share of 25% in each.
  • The rest 25% can be invested as per the investor’s choice.
  • Till now, fund managers of multi cap mutual funds were investing across market capitalisation as per their choice.

Important value additions

Multi-Cap Fund

  • Multi-cap funds are those that diversify their investments into all three categories (small, medium, and large-cap).
  • These funds invest by market capitalization of shares.
  • Large cap stocks: Stocks of top 100 listed companies in terms of full market capitalisation.
  • Mid-cap stocks: Stocks of top 101 to 250 companies in terms of full market capitalisation.
  • Small-cap stocks: Stocks of companies above 251 in terms of full market capitalisation.

Do you know?

  • Market capitalization is the aggregate valuation of the company based on its current share price and the total number of outstanding stocks.
  • It is calculated by multiplying the current market price of the company’s share with the total outstanding shares of the company.

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