MFs have not done a great job in identifying smallcaps: Udayan Mukherjee

Further, such funds will have to make a minimum investment of 25 percent each in equity and related instruments of large-cap, midcap and smallcap companies, according to the circular.

EXPLAINED: New SEBI rule on the portfolio mix of multicap funds

Speaking about the changes, Mukherjee said, “If you look at the history or the track record of smallcap investing from the mutual fund managers, I think that history is at best. Mutual funds in India have not done a great job of identifying smallcaps, and getting their investors to make a lot of money out of it."

“If this had become a room then they would have to put 1000s of crore into smallcaps and I would have feared for investors that they would have ended up losing a lot of money giving their money to mutual funds to identify smallcaps. I don’t think they know that game," he added.

Mukherjee further said that he didn't see a pickup in earnings anytime soon, given the economic trajectory that we are going through.

“I am scratching my head to figure out what would be the drivers of that kind of an earnings acceleration from the base of pre-pandemic. So, I cannot see the justification for a major earnings-driven bull-run at least yet. I would remain quite cautious about putting long term investment money based on this earnings recovery," he said.

Talking about financials, he said, “Let us wait and see what the court has to say on this interest on interest issue because that will have a bearing on their year term performance. This morning’s performance indicates that the Bank Nifty is ready to lead the charge on some kind of a Nifty breakout maybe after the recent highs and beyond that, and if that happens, you could see some performance in the banking space. Whenever that correction happens, I think banks will lead that correction." He added that it may be a good idea to buy some of the good quality banks.