BENGALURU, March 11 Reuters There may be pockets of irrational exuberance in the Indian equity markets, the markets regulator said on Monday, referring to concerns over stretched valuations of small and midcap stocks and large inflows into mutual funds investing in these segments.

The Securities and Exchange Board of India SEBI has suggested mutual fund trustees look at whether lump sum investments into the small and midcap funds are appropriate.

It is not appropriate to allow the froth to keep building, SEBI Chairperson Madhabi Puri Buch said on Monday.

Recently, the markets regulator directed mutual funds to disclose stress test results of small and midcap funds from March 15, to assess the time taken to exit positions in times of stress.

Since the beginning of 2023, the Nifty smallcap 100 and midcap 100 have risen 58 and 54, respectively, outperforming the 23 rise in the benchmark Nifty 50.

Despite concerns over elevated inflows into the segments, smallcaps led the charge among equity mutual fund inflows in February, data from an industry body showed on Friday.

SEBI also said on Monday that it has received feedback that some entities may be misusing provisions of small and medium enterprises39; listings. The markets regulator is collecting evidence on concerns of price manipulation in the segment.

The markets regulator said an optional T0 settlement will be introduced from the end of March, providing an opportunity for investors to settle their stock market…