Securities and Exchange Board of India (Sebi) Chairperson Madhabi Puri Buch has stated that the regulator sees no reason to comment on the recent decline in mid- and small-cap stocks. Speaking at an event in Mumbai on Friday, she referred to her warnings from March 2024, when she had cautioned against potential bubbles in these market segments.
Back then, Buch had highlighted the risks of overheating and urged mutual funds to establish a common policy to safeguard investors. Sebi had also mandated stress tests for mutual fund trustees to evaluate the time required to liquidate investor portfolios during volatile market conditions. Reiterating her stance on Friday, she said, “When the regulator felt the need to issue a statement, it was done. Today, there is no need for any additional comment.”
The mid- and small-cap segments, which had outperformed large-cap stocks throughout FY24, have recently faced a steep sell-off. The Nifty Small Cap 100 index has fallen 18% so far in 2025, while the Nifty Midcap 100 has declined by 13%. Both indices are now nearly 25% lower than their September peaks, reflecting heightened investor caution amid concerns over economic slowdown and trade tensions.
Buch made these remarks at an event organized by the Association of Mutual Funds in India (AMFI), where three key initiatives—Chhoti SIP, Tarun Yojana, and MITRA—were introduced. These programs aim to expand financial inclusion, encourage young investors, and help individuals recover lost mutual fund investments.
Responding to discussions on whether micro-SIPs should be restricted to specific funds, Buch expressed confidence in the industry’s maturity. “Every market participant understands the importance of ensuring that new investors are offered sustainable and suitable products. There is no need for regulatory intervention,” she stated.
Buch also addressed the increasing number of thematic mutual fund schemes, attributing their growth to the lack of restrictions and regulatory differences between regular schemes and new fund offers (NFOs). She noted that Sebi’s recent rule requiring asset managers to deploy funds within 30 days of an NFO’s launch was intended to prevent excessive fund launches.
On concerns regarding distributor malpractices, Buch stressed accountability, stating, “If a mutual fund distributor engages in wrongdoing, we will hold the asset management company accountable.” She also clarified that promotional incentives, such as Swiggy Money linked to SIP completions, must not promise assured returns. “Nobody can guarantee specific returns. If you ask whether that is permitted, the answer is no,” she emphasized.
As part of AMFI’s initiatives, the Tarun Yojana seeks to promote financial literacy among school students by training teachers as financial ambassadors. The program will include a financial knowledge assessment, with top-performing students receiving an SIP investment of ₹100 per month for 24 months. The initiative will first be piloted across nine districts, covering 5,000 students, before a nationwide expansion.
Meanwhile, the MITRA initiative is designed to assist investors and their heirs in recovering unclaimed or forgotten mutual fund holdings.
