Listen to this article
For ETFs and Index funds the circular states that, mutual fund schemes that are based on a widely tracked and non-bespoke index can make investments according to the weightage of the constituents of the underlying index but investments are subject to an overall cap of 35% of the NAV of the scheme in the group companies of the sponsor.
Widely tracked and non -bespoke indices are defined as indices that are tracked by passive funds or act as primary benchmark for actively managed funds with collective AUM of Rs 20,000 cr. and above.
This list shall be determined on half yearly basis as per the above specified AUM threshold as on March 31st and September 30th respectively. The list of such indices shall be updated by AMFI and published on its website by April 15th and October 15th respectively every year, after seeking SEBI’s approval.
Passive schemes based on index that do not meet the criteria given above must rebalance within 30 business days of the circular's issuance. If portfolios are not rebalanced within 30 business days, the scheme must provide a written justification including details of efforts made to the investment committee of the AMC.
Further, the investment committee can extend the rebalancing period by up to 60 business days from the end of the initial 30 business days if needed. If rebalancing is not completed within 60 business days, AMCs will not be allowed to launch any new schemes until the portfolio is rebalanced and they will not be permitted to levy an exit load.
