The Securities and Exchange Board of India, (SEBI) on July 08, 2024, issued a notification regarding the Ease of doing business - Streamlining of prudential norm for passive schemes regarding exposure to securities of group companies of the sponsor of Mutual Funds.
The following decisions have been made regarding equity-oriented ETFs and index funds:
•Investment Cap: These funds can invest according to the weightage of their underlying indices, but with a cap of 35% of the scheme's net asset value in the sponsor's group companies.
•Index Criteria: Widely tracked and non-bespoke indices, tracked by passive funds or acting as primary benchmarks for actively managed funds with a collective AUM of INR 20,000 Cr. or above, qualify under this rule.
•Index List Updates: The list of qualifying indices will be updated biannually (as of March 31st and September 30th) and published by AMFI on April 15th and October 15th, with SEBI's approval.
•Current Index List: The list of qualifying indices as of June 30, 2024, is provided in Annexure A.
•Rebalancing Requirement: Passive schemes based on non-qualifying indices must rebalance within 30 business days from the issuance of the circular.
•Extension for Rebalancing: If rebalancing is not completed within 30 business days, the AMC's Investment Committee must receive a written justification and can extend the rebalancing period by up to 60 business days.
These measures ensure transparency and adherence to investment norms for equity-oriented ETFs and index funds.
[Notification No. SEBI/HO/IMD/IMD-PoD-2/P/CIR/2024/098]
