Mutual Funds want a Rule Change

Mutual Funds want 10% Investment cap on single stocks to be removed

Right now there is a rule for Mutual Funds and the rule is that, Mutual Funds can’t invest more than 10% of their Total Assets in a single stock. This is to prevent the over exposure to any one stock and protect the Investors’ interest.

But now Mutual Funds want a relieve from this rule. The main reason for this is, Reliance Industries. As the weightage  of Reliance Industries in the stock is around 15%. And Reliance is the stock which is responsible for the Indian Bull rally.

According to fund managers, It is Reliance that usually leads a bull rally and if they are constrained than it will obviously affect the performance of their diversified equity schemes.

Reliance Industries is so giant that any portfolio without having the Exposure to Reliance is simply un imaginable.

So far this year, fund managers said several diversified equity schemes have lagged the Nifty by 1-2% because of the rise in Reliance’s Weightage. Fund managers said the inability to increase their exposure to Reliance will result in returns from these schemes lagging the benchmark index.

This Rule doesn’t apply for Index or Sector funds so they don’t need any rule change.