When a veteran fund manager’s warning about overvalued markets sparks industry backlash, it exposes a systemic flaw. Sankaran Naren, Chief Investment Officer of ICICI Prudential AMC, was recently caught in the eye of the storm for raising caution over froth in mid- and small-cap stocks. This event has revealed an uncomfortable truth about the Indian mutual fundindustry — the stranglehold of distributors. The furore over Naren’s speech, ironically at an event organised by Independent Financial Advisors, is no tempest in a teapot. It is a call for all stakeholders to introspect.Naren’s call for caution was neither alarmist nor unfounded. Valuations in the small- and mid-cap segments have been running hot, a sentiment echoed by Securities and Exchange Board of India chief Madhabi Puri Buch as early as March 2024.
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