After the asset allocation rule change on multi-cap schemes, SEBI in the interest of its mutual fund investors is now considering to introduce new risk category 'very high risk' for evaluating the mutual fund risk type.
Currently there are 5 risk profile category:
Furthermore, for the risk assessment of equity and debt funds, the market watchdog will mandate distinct criteria. For equity mutual funds, the 3 parameters will be volatility, impact cost and m-cap. These will be able to better determine the associated risk. And the impact of the move shall be on schemes holding small and mid-cap stocks and even stock themselves. And hence as per analyst given the current volatility conditions, all of the equity funds shall come under high or very high risk category.
For debt funds, the parameters shall be credit quality, bond duration and liquidity. And hence all of the issues faced with the debt funds will be checked for. Say for instance all the short term bonds are currently placed under 'moderately low' risk profile which can be rather not true for all schemes under the category. So, better risk sense shall be provided to investors.