In the wake of recent market turbulence triggered by concerns over stretched valuations, Ajay Tyagi, head of equities at UTI Mutual Fund, has welcomed the regulatory intervention by the Securities and Exchange Board of India (Sebi). Tyagi emphasized the importance of proactive measures to prevent potential market bubbles and maintain stability.
Tyagi noted that Sebi’s cautious approach, particularly its directive for stress testing and disclosure requirements for small- and mid-cap funds, has had a positive signaling effect. He underscored the significance of such regulatory actions in averting excessive speculation and mitigating the risk of market downturns.
Speaking to Moneycontrol in an interview, Tyagi expressed confidence in UTI Mutual Fund’s preparedness for stress testing, highlighting the firm’s robust liquidity management practices across its equity and debt funds.
In response to concerns regarding potential selling pressure arising from stress testing outcomes, Tyagi reassured that mutual funds are unlikely to engage in immediate selling, as Sebi has mandated disclosure for investor awareness rather than imposing divestment requirements.
Regarding the market outlook, Tyagi refrained from making specific predictions but acknowledged prevailing overvaluation concerns, particularly in the small- and mid-cap segments. He emphasized the need for cautious portfolio construction and highlighted the ongoing corrections observed in these segments.
Looking ahead, Tyagi suggested that 2024 could witness a period of consolidation or even correction, cautioning investors against unrealistic expectations of uninterrupted positive returns.
In a separate development, Jefferies characterized the recent selloff in small caps and mid caps as a healthy correction rather than a broader meltdown, echoing sentiments of cautious optimism amidst market volatility.
