Securities and Exchange Board of India (Sebi) chairperson Madhabi Puri Buch has made it clear that the regulator sees no need to comment on the recent slump in mid- and small-cap stocks. Speaking at an event in Mumbai on Friday, she referenced her earlier warnings from March 2024, when she raised concerns over potential bubbles in these market segments.
At the time, Buch had stressed the risks of overheating and urged mutual funds to adopt a common policy to protect investors. Sebi had also mandated stress tests from mutual fund trustees to assess how long it would take to liquidate investor portfolios in volatile market conditions. On Friday, she reiterated, “At the point in time when the regulator felt the need to make a statement about it, the statement was made. Today, the regulator feels no need to make an additional statement.”
The mid- and small-cap segments, which outpaced large-caps for much of FY24, have recently suffered a sharp sell-off. The Nifty Small Cap 100 index has dropped 18% so far in 2025, while the Nifty Midcap 100 has declined 13%. Both indices are down nearly 25% from their September peaks, reflecting growing investor caution amid economic slowdown concerns and trade tensions.
Buch was speaking at an event organized by the Association of Mutual Funds in India (AMFI), where three key initiatives were launched—Chhoti SIP, Tarun Yojana, and MITRA. These initiatives aim to widen financial inclusion, promote investing among young people, and help investors trace forgotten mutual fund investments.
Addressing concerns over whether micro-SIPs should be restricted to certain funds, Buch said the mutual fund industry in India is mature enough to make such decisions independently. “Every player in the system knows that when you are bringing fresh investors into the market, you need to ensure the product is suitable and sustainable. That maturity already exists in the MF ecosystem. So, there is no need for a regulator to have any view in the matter,” she said.
Buch also spoke about the rising number of thematic mutual fund schemes, attributing their proliferation to the absence of limits and regulatory arbitrage between regular schemes and new fund offers (NFOs). She noted that Sebi’s recent mandate requiring asset managers to deploy funds within 30 days of an NFO’s launch was aimed at curbing excessive fund launches.
On concerns over distributor malpractices, she emphasized accountability. “If there is any wrongdoing by a mutual fund distributor, we will hold the AMC accountable and responsible,” Buch stated. Regarding promotional incentives like Swiggy Money linked to SIP completions, she reiterated that any assurance of returns is strictly prohibited. “Nobody can say this is how much you will get at the end. If you ask us whether that is allowed, it is not.”
As part of AMFI’s initiatives, the Tarun Yojana aims 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 be piloted across nine districts, covering 5,000 students, before a nationwide rollout.
The MITRA initiative, meanwhile, will assist investors and their heirs in recovering unclaimed or forgotten mutual fund holdings.