Sebi does not need to remark on the slight- and mid-cap downturn. Madhabi Puri Buch

Madhabi Puri Buch, chairman of the Securities and Exchange Board of India (Sebi), said on Friday that the regulator did not need to comment on the current drop in mid-and small-cap stocks, which had raised her worries last year due to their high valuations.

Speaking at an event in Mumbai, the regulator relied on her March 2024 statement, in which she warned investors about possible bubbles in the small and mid-cap groups, emphasizing that it may not be acceptable to allow froth to continue to rise. She had encouraged mutual funds to develop a unified strategy to safeguard investors during a period of volatility in an overheated small and mid-cap industry.

Stock prices of small- and mid-cap businesses, which outperformed large-caps for the rest of FY24, have fallen amid a persistent sell-off triggered by slowing GDP and trade concerns. The Nifty Small Cap 100 index has lost almost 18% of its value thus far in 2025, while the Nifty Midcap 100 index has lost 13%. Since their September highs, both indices have lost over a fifth of their value.

AMFI’s New Initiatives and Sebi’s Regulation Approach:

Buch was speaking at an event hosted by the Association of Mutual Funds in India (AMFI), which announced three strategic initiatives – Chhoti SIP – Sachetization of Mutual Funds, Tarun Yojana, and MITRA – Mutual Fund Investment Tracing and Retrieval Assistant – to promote financial inclusion and simplify, trace, and retrieve forgotten investments. Regarding whether these micro-SIPs will be limited to specific funds, such as large-cap schemes with better capital preservation, Buch stated that the mutual fund market in India is entirely developed and does not require instructions. “In a mature business, every actor in the system understands that when bringing new investors into the market, you must ensure that the product is fit for that investment, does not leave after a short time, and remains for an extended term. That maturity is already there in the mutual fund environment. So there is no need for a regulator to have an opinion on the topic,” Buch added.

In December 2024, Sebi declared that fund managers must deploy cash acquired during an NFO by asset management firms (AMCs) by the scheme’s predetermined asset allocation, usually within 30 days. According to the regulator, if funds are not deployed within the designated time frame, investors will be able to quit the plan without having to pay an exit fee.

Regarding worries about mutual fund distributors and potential malfeasance, Buch underlined that distributors work for AMCs, not as independent businesses. “If there is any wrongdoing by a mutual fund distributor, we will hold the AMC accountable and liable,” she informed us.

Financial Knowledge and Investor Safety:

Buch established the ‘Tarun Yojana’ to encourage financial awareness and a culture of saving and investing among children, in addition to the Chhoti SIP, a ₹250 systematic investment plan for mutual funds. Teachers from chosen schools will be educated as financial literacy ambassadors as part of the AMFI project. They will teach pupils essential economic principles, including investment. After the class, students will be assessed on their financial knowledge. The top 20% of students will receive investments made in their names through SIPs in a chosen mutual fund plan. Students will receive a SIP of ₹100 monthly for 24 months, totaling ₹2,400.