SEBI Chief Tuhin Kanta Pandey Warns MFs on Microcap Investments
- SEBI Chief Tuhin Kanta Pandey advises AMCs to be careful while investing in microcap companies and bespoke debt deals, emphasizing proper documentation and due diligence.
- He highlights the potential of Rs 250 'choti SIPs' to encourage first-time and small-ticket investors to enter the mutual fund space.
- Pandey warns against fraudulent redemptions by impersonators and urges AMCs to act promptly to maintain investor confidence.
Asset management companies (AMCs) have been urged to exercise caution while investing in microcap companies, Securities and Exchange Board of India (SEBI) Chairperson Tuhin Kanta Pandey said.
Speaking at the 30th anniversary of the Association of Mutual Funds in India (AMFI), Mr. Pandey emphasized that while diversification beyond blue-chip stocks is important, investing in microcap companies or debt papers in bespoke deals requires careful scrutiny. He highlighted the need for proper documentation to ensure transparency and sound due diligence in investment decisions.
Microcap companies, as defined by SEBI, are listed companies with a market capitalization ranging from Rs 500 crore to Rs 1,000 crore. Mr. Pandey’s remarks gain importance in the backdrop of concerns raised by former SEBI Chairperson Madhabi Puri Buch, who had earlier flagged excessive froth in the microcap segment.
Apart from microcap investments, Mr. Pandey spoke about the potential of 'choti SIPs', allowing investors to contribute as little as Rs 250. He said this small-ticket investment approach can encourage first-time and small investors to enter the mutual fund space confidently.
“This sachetisation of investing opens the door for first-time and small-ticket investors to enter the mutual fund space with confidence. The product is still at a nascent stage but has the potential to make a significant impact in the coming years. The industry should collaborate and explore ways to expand it, even if minor tweaks are needed”, he said.
Mr. Pandey also cautioned about issues that could affect investor confidence, including fraudulent redemptions carried out by impersonators. He urged AMCs to act promptly on such complaints to maintain trust in the mutual fund sector.
His remarks come at a time when SEBI continues to focus on investor protection while promoting wider participation in the capital markets. Experts say that while microcap investments can offer high returns, due diligence and cautious approach remain key to preventing risks.
