Sebi’s exit load cut a ‘hygiene change’, says Feroze Azeez

The Securities and Exchange Board of India’s (SEBI) recent regulatory changes—from lowering the exit load cap on mutual funds to reclassifying REITs as equities—are drawing attention from market experts. Speaking to ET Now, Feroze Azeez, Deputy CEO of Anand Rathi Wealth, described the measures as “progressive,” while also stressing that their real impact may vary across investors and asset classes.

On the exit load cap being brought down from 5% to 3%, Azeez was clear that the move is more symbolic than disruptive. “Some are hygiene changes. I would categorise this as a hygiene change. Not that the 5% limit was being utilised by anybody largely,” he noted. With nearly 600 active equity mutual funds and thousands in the debt space, Azeez pointed out that no fund house had practically reached the 5% threshold.

Interestingly, Azeez shared findings from a study that compared performance across closed-ended and open-ended funds managed by the same fund managers. “The performance of the same fund manager in an open-ended fund was better than in a closed-ended fund. We realised that Indian managers, when having the fear that the investor will go away, perform better and 8 out of the 10 fund managers did better than themselves in an open-ended format than in a closed-ended format,” he said. For him, the takeaway is clear: exit loads have not truly helped investors, and even a 3% level remains “astronomically high.”


On the decision to reclassify Real Estate Investment Trusts (REITs) under equities, Azeez welcomed the wider flexibility it gives fund managers but remained cautious about its investment appeal. “The freedom of the fund manager to have REIT in the equity portion is always a great thing. But if you look at REITs in isolation, I do not think it has done well in India,” he said.

While REITs in India remain limited in number and show equity-like volatility without delivering comparable returns, Azeez believes they can still serve as an effective portfolio tool. “Should a fund manager have a leeway to not have cash in his portfolio, but have something else when he is not very comfortable with the valuations of the segment he is supposed to be operating, brilliant,” he added.

On the broader regulatory changes aimed at boosting IPO participation and foreign inflows, Azeez was emphatic in his support. “Like you rightly said these are very-very sharp and very good moves. They are progressive,” he said. He also underlined how different classes of investors behave in the IPO market.

“An FII is a little more valuation insensitive, but very sensitive to growth. The domestic institutional investors are very growth sensitive, very valuation sensitive. The retail till some time back was chasing his own tail but now has become very smart. It is starting to learn to buy low, sell high,” he explained.

According to Azeez, retail investors typically treat IPOs as short-term bets, while institutions view them as long-term holdings. “More IPO should go into institutional hands so that the good valuations are capitalised on rather than you flip it for a listing gain which is what the retails and others are doing,” he argued.

With SEBI pushing for tighter rules and broader participation, Azeez believes the market is evolving into a healthier, more sophisticated ecosystem—though the true test will be how investors adapt to these new dynamics.

An evening at Lal Qila, September 27, 2025 — reserved for Times Black ICICI Bank Credit Card holders. Access monumental experiences at timesblack.com

“Perfection is achieved not when there is nothing more to add, but when there is nothing left to take away.” — Antoine de Saint-Exupéry