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SME Stocks Manipulation:
- Signs of IPO price manipulation and trading malpractices in SME stocks have been observed.
- SEBI is working to evidence such manipulations, with measures underway to protect investors.
Regulatory Alarm Bells:
- SEBI and the Association of Mutual Funds in India (AMFI) have raised concerns over price manipulation in SME IPOs and excessive speculation in small and mid-cap stocks.
- AMFI has advised mutual funds to protect investor interests by moderating inflows and rebalancing portfolios.
SME IPOs on the Rise:
- A significant increase in SME IPOs, with 182 in 2023 raising over Rs 4,600 crore, highlights a trend of SMEs seeking public funds.
- Regulatory frameworks aim to facilitate SME growth while maintaining market integrity.
Investor Influx and Valuation Concerns:
- Massive inflows into small and mid-cap funds raise concerns about high valuations and the potential for significant losses during market corrections.
- AMFI and SEBI urge caution and proactive measures to safeguard investor interests.
Regulatory Actions and Recommendations:
- AMFI recommends mutual funds take measures against the unchecked inflow into small and mid-cap stocks.
- SEBI suggests public consultation before imposing caps on mutual fund inflows and emphasizes more risk disclosures for SME IPOs.
Why in News
- Small and mid-cap stocks have surged significantly, with small caps gaining 33% and mid caps over 24% in the past six months. This surge outpaces the benchmark Nifty 50’s growth, indicating potential overvaluation and speculative trading.
