Mutual fund ‘Risk-o-Meter’ to have 6 categories

The Securities and Exchange Board of India (Sebi) has reviewed the guidelines for product labelling in mutual fund schemes based on the risk of their portfolios.

The capital markets regulator said the so-called risk-o-meter — a pictorial chart that depicts the risk of the mutual fund product — will have six categories ranging from ‘Low’ to ‘Very High’ depending on the stocks or securities that they invest in.

For equity schemes, the risk parameters include market capitalisation, volatility and liquidity measure. “Risk value for equity portfolio shall be a simple average of market capitalisation value, volatility value and impact cost value,” Sebi said.


For debt schemes, the risk parameters include credit, interest rate and liquidity. Sebi said the risk value for a debt portfolio will be a simple average of the three factors. The new rules will come into effect from January 1, 2021.