Motilal Oswal Asset Management Company has temporarily halted fresh inflows into its Nifty Microcap 250 Index Fund, effective January 8, following regulatory consultations with the Securities and Exchange Board of India (SEBI). The decision stems from discussions regarding the scheme's alignment with prevailing mutual fund categorisation norms.

Regulatory Compliance Concerns

The pause in fresh inflows comes as SEBI's current mutual fund categorisation framework does not recognise micro-cap as a separate investment category. This regulatory gap has prompted discussions between the asset management company and the market regulator regarding the fund's classification and compliance requirements.

The fund's investment strategy focuses on 250 stocks that fall beyond the top 500 companies by market capitalisation, effectively targeting the micro-cap segment of the Indian equity market.

Fund Operations and Investor Impact

Motilal Oswal Asset Management has assured existing investors that their investments remain secure and unaffected by the temporary suspension. The scheme will continue to be managed according to its stated investment approach, maintaining consistency with its operational framework since inception.

Transaction Processing Guidelines

Any investment transactions received after 3:00 PM on January 8 will not be processed under the current suspension. These transactions will be refunded to investors in accordance with applicable regulatory procedures and company policies.

Way Forward

The asset management company stated that it remains in active discussions with SEBI to determine the appropriate path forward for the fund. These consultations aim to resolve the categorisation alignment issues while ensuring compliance with regulatory requirements.

The company has emphasised that existing investors need not be concerned during this interim period, as the fund's management and investment strategy will remain unchanged while regulatory discussions continue.