ICICI Pru AMC suspends lumpsum investments in its midcap and smallcap funds

New Delhi: ICICI Prudential Asset Management Company has suspended fresh subscriptions through lumpsum mode and switches into ICICI Prudential Smallcap Fund and ICICI Prudential Midcap Fund effective 14 March.

The move by ICICI Prudential AMC is in response to heavy flows in the midcap and smallcap categories, resulting in these outperforming largecap stocks and stretching valuations.

Several other fund houses have also stopped accepting lumpsum investments and imposed limits on investments in smallcap and midcap funds.

Both the Nifty Midcap 150 Index and the Nifty Smallcap 250 Index have delivered significant returns over the past year, at 55% and 59%, respectively, compared with the Nifty 100 Index’s 33%.

Additionally, the current share of midcap and smallcap stocks in the total market cap is 36.4%, higher than the last 15-year average of 25.4%, according to a report by ICICI Prudential AMC.

The asset management company recommended investing in a staggered manner, adding that systematic investments offer predictability in flows and are more efficient in deployment due to their lower ticket size.

ICICI Prudential AMC has allowed its systematic investment plans and systematic transfer plans to continue. But it has capped fresh SIP and STP registrations at ₹2 lakh per individual per month.

The SIP top-up facility will not be available for fresh registrations in these schemes from here on, the company said.

The Securities and Exchange Board of India has raised concerns about the high valuations of smallcap and midcap stocks, and suggested money managers to limit inflows in these schemes.

This regulatory intervention is aimed at protecting investors’ interests and ensuring the stability of the market.

The Association of Mutual Funds in India has also asked asset management companies to disclose how many days they would need to liquidate their midcap and smallcap portfolios from 15 March.