The mid and small-cap segments, which out performed large-cap stocks for most of FY24, are now witnessing a sharp downturn. In 2025, the Nifty Small Cap 100 index has plunged by 18%, while the Nifty Midcap 100 index has declined 13%. Compared to their September peaks, both indices have fallen nearly 25%, reflecting investor caution amid economic uncertainty and global trade tensions.

SEBI’s Stance on Market Volatility

SEBI Chairperson Madhabi Buch had previously cautioned about the risks of market overheating, urging mutual funds to implement strategies to safeguard investors. To ensure market stability, SEBI had mandated stress tests for mutual fund trustees, helping assess liquidity risks during volatile conditions. Addressing recent concerns, Buch stated, “The regulator made a statement when needed. As of today, there is no further necessity for an additional statement.”

Key Initiatives Launched by AMFI

Speaking at an event organized by the Association of Mutual Funds in India (AMFI), Buch introduced three key initiatives aimed at boosting financial participation:

• Chhoti SIP – Encouraging small investments for broader financial inclusion.
• Tarun Yojana – Promoting investments among young investors.
• MITRA – Assisting investors in tracking unclaimed mutual fund investments.

SEBI’s Stand on Mutual Fund Regulations

Addressing concerns about whether micro-SIPs should be restricted, Buch emphasized that India's mutual fund industry is mature enough to make such decisions independently. She reiterated that asset managers and distributors must ensure investment suitability for new investors without regulatory intervention.

She also discussed the rise of thematic mutual fund schemes, attributing their proliferation to regulatory loopholes between regular schemes and New Fund Offers (NFOs). To curb excessive fund launches, SEBI now requires asset managers to deploy funds within 30 days of an NFO’s launch.

Ensuring Distributor Accountability

Buch underscored SEBI’s commitment to investor protection, warning that mutual fund distributors engaged in malpractices would result in Asset Management Companies (AMCs) being held accountable. She also reaffirmed SEBI’s stance on investment promotions, stating that offering incentives like Swiggy Money for SIP completions is strictly prohibited, reinforcing that no scheme can guarantee assured returns.

Conclusion

The ongoing correction in mid and small-cap stocks underscores the importance of investor caution and regulatory oversight. With SEBI closely monitoring market trends and enforcing investor-friendly policies, the focus remains on maintaining market stability and fostering sustainable investment growth.

Disclaimer: This article is for informational purposes only and should not be construed as investment advice. Please consult a financial advisor Mbc trading Platform  before making any investment decisions.