About ₹40,000 crore would’ve had to flow from large-cap scrips, which account for the bulk of their holdings, to shares of smaller companies. As these see thin trade volumes, inflows could give them more liquidity and eventually make it easier for such firms to raise capital. Already, mid- and small-cap valuations are seen as overstretched. Specifically, with smaller firms doing badly, the rule could load multi-cap funds with greater risk. But the churn won’t be pretty.

Source: Mint September 13, 2020 16:18 UTC