Tipping Point: Restrictions put on sales of Reliance Small Cap Fund units

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Restrictions have been placed on sales of units of Reliance Small Cap Fund. Why? 

Reliance Small Cap Fund recently joined the list of funds in which restrictions have been imposed on lump sum investments. The fund will, however, continue to receive systematic investments of up to Rs 100,000. In the past, many other funds have placed restrictions on inflows: DSPBR Microcap, Mirae Asset Emerging Bluechip, L&T Emerging Business Fund etc. 

What should you do?

Such restrictions are like a warning bell for retail investors. If fund managers, with all the research capabilities at their disposal, are having a difficult time finding investment options at attractive valuations, what chances do you stand? Direct investors in equities should focus their research efforts towards other market segments, where valuations are more reasonable. Fund investors should maintain their allocation to small-cap funds and book profits if overweight.

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