A stock in a Rs 2,000 crore flexi cap fund has rallied from 8% to 12% of the fund, above its 10% single-stock limit. How much must be sold to bring it to 9.5%, what does the sale cost, and what must the fund confirm about the rule?

Sell about Rs 50 crore, over roughly 10 trading days, at a cost of about Rs 15 lakh. The position is Rs 240 crore and 9.5% of an unchanged Rs 2,000 crore is Rs 190 crore. Trimming to 9.5% rather than 10% leaves room for a 5.8% further rise before the next breach. Confirm the current regulatory limit and the time allowed to cure a price-driven breach with compliance.

Because weights move with prices. If the stock rises and the rest of the fund does not, the stock's share of the pie grows. With the rest of the fund flat, a rise of about 57% takes an 8% holding to 12%. It is the same as one tenant in a building whose rent triples while the others stay put: his share of the landlord's income jumps without anyone signing anything new. A breach like this is usually called passiveCaused by market movement or redemptions rather than by the fund buying more; rules often allow a set period to correct it rather than forcing an immediate sale., and it is treated differently from one the manager caused by buying.

The position is 12% of Rs 2,000 crore, Rs 240 crore. Selling shares turns them into cash inside the same fund, so net assets stay at Rs 2,000 crore and the target is simply 9.5% of that, Rs 190 crore. The sale is Rs 240 minus Rs 190, Rs 50 crore. The cash is then redeployed across the other holdings or kept as the fund's normal cash buffer; either way it does not change the arithmetic.

At 20% of Rs 25 crore of daily volume the desk can sell about Rs 5 crore a day, so Rs 50 crore takes about 10 trading days. At 0.30% all in, the cost is about Rs 15 lakh, which is 0.75 basis points of the fund. The cost that matters more is the price risk while you sell: ten days of a volatile stock can move the weight again, so the desk works the order and the manager watches the weight daily. Dumping the whole Rs 50 crore on one day to be done with it would likely push the price down and cost far more than the careful route.

A trim to exactly 10% leaves no room at all: any rise in the stock breaches again, and the fund pays dealing costs over and over. Trimming to 9.5% buys room for a 5.8% rise with the rest of the fund flat; 9.0% would buy 12.3%. The size of the buffer is a trade-off between keeping a stock the manager likes and the cost of repeated trims. On the rule itself, treat 10% as the case's figure. Confirm with compliance the current single-issuer limit for this scheme category, how it is measured, and the period allowed to correct a breach caused by market movement, because the regulator sets these and revises them.