Industry players said the churn could have been higher for the January-June period, had share prices not rebounded.
Kaustubh Belapurkar, director (research) at Morningstar India, says that though the churn hasn’t had a huge impact on portfolios historically, one nevertheless needs to look at the changes this time.
He, however, said the industry has enough flexibility to navigate through the changes without much turbulence. “Fund managers usually have a sense of stocks that could potentially move in and out of their respective universe. They take corrective action accordingly. Hence, the changes are something that will not be out of the blue,” he said.
Industry players said the Securities and Exchange Board of India provides enough time for fund managers to rejig. Further, there is enough room available to invest outside the stated universe.
For instance, an equity scheme in the large-cap universe has to invest 80 per cent of its corpus in stocks among the large-cap bucket, while the remaining 20 per cent can be in mid-caps or small-caps.
Similarly, mid-cap and small-cap schemes have to invest 65 per cent in the respective bucket, while the rest could even be in large-caps. At present, in the equity MF space, the large-cap category is the biggest with assets of Rs 1.24 trillion. The mid- and small-cap categories had assets of Rs 71,550 crore and Rs 39,000 crore as of end-May.
Market players said that in the event of large-scale redemptions accompanied by high volatility, some schemes could have difficulties in churning their holdings.
However, both in terms of flows and secondary market liquidity, the situation is normal at present, they added.