Market regulator Securities and Exchange Board of India (SEBI) introduced a new category named "Very high risk" under risk-o-meter on mutual funds schemes to warn investors. The existing five categories related to measuring risks are low, low to moderate, moderate, moderately high and high. These are used by Sebi to select the right choice with a certain loss. As a new circular passed by Sebi in which it is mentioned that mutual funds have to assign a risk level to every new scheme which he is going to launch. It future mentioned that if any changes are risks-o-meter is done a notice will be sent with the help of an e-mail of SMS to the stakeholder of that scheme.
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Risk-o-meter will be changed on a monthly basis as the new scheme launches. The company has to evaluate it again along with the portfolio disclosure within 10 days of next month. Sebi-assisted mutual funds should publish their schemes in tabular form which can be easily understood. Even it stated the scheme and risk meter to be mentioned in their website in such a manner that could easily be visible to the user of that scheme.
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"This is a very good initiative from Sebi and looking at the recent experiences where there has been a gap between perceived risk and actual risk and quite a pragmatic approach for the protection of Investors' interest," said Omkeshwar Singh, head RankMF at Samco Securities.
