Fund Managers have been given time till January 2021 to comply with these revised asset allocation guidelines. The rebalancing of existing Multi-Cap portfolio would translate into Rs.14,300 cr and Rs.28,000 cr of potential inflows to Mid-Cap and Small-Cap companies while it could lead to potential outflow of Rs.34,000 cr from the Large-Cap category.
In terms of percentage, large-cap category could see ~32% of outflow from the existing holding in the large-cap companies. For Mid-cap and Small-Cap categories, this percentage would be much higher – 64% and 322% of their existing exposure in Multi-Cap category. Nonetheless, this might not have material impact on the large-cap stocks, given the liquidity in those stocks. However, the lack of liquidity in Mid-Cap and Small-cap categories can create impact cost for several of the Multi-Cap Funds.
On the other hand, FM can also merge the existing Multi-Cap schemes with the existing Large Cap/Focussed funds and launch a new multi-cap scheme. There could be even inter-scheme transfers, where one scheme of a Mutual Fund sells securities to another scheme within the fund house rather than selling the assets outside. We have seen these kinds of transfers in the recent past, post Franklin Templeton debt crisis. Moreover, several of the AMCs are coming with NFOs in coming months which increases the chances of inter-scheme transfers in near future.