The Securities and Exchange Board of India (SEBI) has announced new norms mandating multi-cap funds invest at least 25 per cent each in large-cap, mid-cap and small-cap stocks. These are expected to bring fresh buying worth Rs 25,000 crores and Rs 10,000 crores in small caps and mid-cap stocks respectively, says a report by ICICI Direct. SEBI has issued the circular on portfolio allocation of multi-cap equity mutual funds on Friday. ICICI Direct came out with a small-cap portfolio for funds. 

Multi cap funds constitute over 19% of the total actively managed equity mutual funds AUM. It is the biggest category with large-cap schemes, also having a similar share in the total equity AUM.

Most of the multi-cap funds at present are large-cap biased with around 70-80 per cent of their portfolios in the more prominent companies. Though mutual funds have an option to merge or convert their multi-cap fund to other category, market analysts expect a massive wave of buying in mid and small stocks if these schemes decide to remain as multi caps and abide by the new portfolio rules.