Thread by @srinicaps

@SEBI_India latest move to ask multi caps funds to invest mandatory 25 % of allocation to Small caps has been receiving lots of praise and criticism
But investors need to remember Small caps have their own significance with associated risks

Small caps generally offer higher growth potential , but these stocks also experience volatility and are prone to more risks in terms of management and are vulnerable as compared to Large caps or Mid caps

Small cap stocks often trade in tandem with the rest of the market, but on certain days and over the course of economic cycles they may behave differently, offering clues about market sentiment and trends

This include a potentially higher chance for a credit downgrade,

cash crunch, or even bankruptcy, because small caps may not have pockets as deep as other large and medium size companies. Their stocks may not be as widely held, and the illiquidity can make it harder to sell shares that are tanking. There may not be as much information

out there about small-cap companies

In general, small-cap companies tend to appreciate more than large-caps during periods of economic growth because of their lower valuations and higher level of debt.

De-globalisation should benefit domestically oriented small caps but of course the risks are always higher than the superior traded companies
@SEBI_India and @RBI have in the past have failed to protect Debt & Equity investors in cases where there has been mismanagement ,

so this new order for multi cap mutual funds doesn’t come as foolproof and has its own share of risks associated for investors
@amfiindia

@threadreaderapp
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SEBI’s Multi-Cap Fund Rule Will Push $5 Billion To Mid And Small Caps

bloombergquint.com/markets/sebis-…