This year the annual update of Mint50, the curated list of 50 investment-worthy mutual funds got a six-month delay. We usually release the list in January of the year with a list of funds that have moved out and those that have moved in. But this year was different because capital market regulator Securities and Exchange Board of India (Sebi) changed the rules of the game, making a big change in the industry. The changes needed to play out before we could do our research ahead of the new list. The new list is now out and our big change is that we have shrunk the 50 mutual fund list to 30.
What was this change and why is it important? Sebi did two things. One, it divided up the industry into 36 categories of funds, allowing every fund house to have one scheme in the category to reduce the clutter in the industry. Read this column where I had suggested that this is the way to go forward to bring order in the industry in 2015. It took two years for Sebi to finally push funds into doing this. Sebi has left the door open for new innovations that will get their own categories as markets mature further. Mutual fund companies were launching too many schemes that replicated the older schemes causing investor confusion. By defining categories and being very generous with the number of categories, Sebi has left plenty of elbow room for the fund houses to place their funds in a category they think the scheme serves.