In the year 2020, market regulator issued guidelines to make multi-cap funds more true-to-label by enforcing minimum exposure to large, mid and . While a few AMCs (asset management companies) adjusted their as per the mandate, several converted their existing multi-cap funds to flexi-cap schemes so that they could continue with their large cap-heavy portfolio allocations. As of end-April 2021, the market had around 25 with Rs 1,59,480 crores of AUM, and 12 multi-cap funds with Rs 19,846 crore in AUM.
Another important aspect is the ‘beta’ of mid and small-caps. Mid and small-caps can be disproportionately impacted by market movements, which means they are usually more volatile than large cap stocks. Because of these characteristics, investing in mid and small caps is considered a relatively high risk-high reward venture, requiring a long-term mind set.