The RA Regulations provide a comprehensive framework for model portfolios. This framework ensures that model portfolios are transparent, well-defined, and compliant with regulatory requirements. This article provides a comprehensive technical analysis of the complete model portfolio framework.
Regulatory Basis
The model portfolio framework is specified in Annexure-A of the Master Circular for Research Analysts dated February 06, 2026. The framework is based on the RA Regulations, including Regulation 2(1)(wa) and Regulation 24(8) .
Definitions
1. Model Portfolio
"A 'model portfolio' shall mean a basket of securities for which a research report is issued by a RA recommending the relevant weightages for one or more securities mentioned therein."
Key Elements:
- Basket of securities.
- Research report.
- Recommended weightages.
- One or more securities.
2. Disclosures
"Means the minimum set of disclosures as specified in this model portfolio framework to be mandatorily included in a model portfolio report, in order to ensure that all the relevant facts and information which could impact the investment decision of a potential investor are adequately made known to the investors."
3. Launch Date
"Means the date on which model portfolio report was issued by the RA."
4. Update Date
"Each model portfolio should clearly list the dates and/or intervals at which model portfolio shall be reviewed and updated by RA and the launch date of each such updated model portfolio shall be deemed to be the 'Update Date'."
Model Portfolio Framework
1. Model Portfolio Report
Requirements:
- Issued through a research report.
- All constituent securities recommended.
- Rebalancing at intervals as the RA deems appropriate.
- Opinion on constituent securities shall not be contrary to opinion on each security individually.
- Include a 'factsheet' setting out basic information.
- Contain disclosures, rationale, methodology, launch date, update date, and type.
2. Methodology
Requirements:
- Define and discuss the framework.
- Define underlying universe for stock selection.
- Label to indicate type of underlying universe.
- Define and discuss methodology for selection.
- Include parameters of the methodology.
3. Labelling
Requirements:
- 'True to label' requirement.
- Name must clearly state the type of portfolio.
- Include a one-line description of the theme or investment objective.
4. Investment Horizon
Requirements:
- Specify the investment horizon of the model portfolio.
- Enable investors to match to their investment period.
5. Frequency of Portfolio Review and Update
Requirements:
- Predefine the intervals at which the portfolio will be updated.
- Communicate rebalancing to clients along with rationale.
6. Risk Disclosures
Requirements:
- Clearly mention model portfolio risk.
7. Benchmarking
Requirements:
- Disclose performance validated by agency/body as specified by SEBI.
- Benchmark with appropriate and relevant index.
- Consistent use of benchmark.
8. Audit Requirements
Requirements:
- Compliance with audit requirement under Regulation 25(3).
- Cover compliance with model portfolio guidelines.
Detailed Analysis of Each Requirement
1. Model Portfolio Report
| Requirement | Details |
|---|---|
| Issued Through | Research report |
| Constituent Securities | All recommended |
| Rebalancing | At RA's discretion |
| Opinion Consistency | Not contrary to individual opinion |
| Factsheet | Basic information |
| Contents | Disclosures, rationale, methodology, launch date, update date, type |
2. Methodology
| Requirement | Details |
|---|---|
| Framework | Underlying universe for stock selection |
| Labelling | Type of underlying universe |
| Selection Methodology | Fundamental analysis, technical analysis, etc. |
| Parameters | As defined by the methodology |
3. Labelling
| Requirement | Details |
|---|---|
| True to Label | Name reflects actual portfolio |
| Type of Portfolio | Clearly stated |
| Description | One-line description of theme or investment objective |
4. Investment Horizon
| Requirement | Details |
|---|---|
| Specification | Clearly state the investment horizon |
| Matching | Enables investors to match to their investment period |
5. Frequency of Review and Update
| Requirement | Details |
|---|---|
| Predefined | Intervals predefined in the report |
| Rebalancing | Communication to clients with rationale |
6. Risk Disclosures
| Requirement | Details |
|---|---|
| Clear Mention | Model portfolio risk clearly mentioned |
7. Benchmarking
| Requirement | Details |
|---|---|
| Performance Validation | Validated by agency/body as specified by SEBI |
| Benchmark | Appropriate and relevant index |
| Consistency | Consistent use of benchmark |
8. Audit Requirements
| Requirement | Details |
|---|---|
| Audit Requirement | Regulation 25(3) |
| Coverage | Model portfolio compliance |
Sample Model Portfolio Structure
Model Portfolio Factsheet
| Aspect | Details |
|---|---|
| Name | India Large Cap Growth Portfolio |
| Type | Large Cap |
| Theme | Growth |
| Launch Date | April 1, 2025 |
| Update Date | Quarterly |
| Investment Horizon | 3-5 years |
| Benchmark | Nifty 50 |
Model Portfolio
| Security | Weightage | Rationale |
|---|---|---|
| HDFC Bank | 20% | Market leader, strong financials |
| Reliance Industries | 18% | Diversified conglomerate, strong growth |
| Infosys | 15% | IT leader, strong digital capabilities |
| ICICI Bank | 12% | Strong banking franchise |
| Tata Consultancy Services | 10% | IT leader, strong client relationships |
| Larsen & Toubro | 8% | Infrastructure leader |
| Axis Bank | 7% | Strong banking franchise |
| Kotak Mahindra Bank | 5% | Strong financials |
| Bajaj Finance | 3% | Financial services leader |
| Maruti Suzuki | 2% | Auto leader |
Common Compliance Gaps
1. Incomplete Factsheet
Some RAs do not include a complete factsheet.
Solution: Include a comprehensive factsheet.
2. No Methodology
Some RAs do not define the methodology.
Solution: Define and discuss the methodology.
3. No Benchmark
Some RAs do not benchmark the model portfolio.
Solution: Benchmark with appropriate index.
4. Not Communicating Rebalancing
Some RAs do not communicate rebalancing to clients.
Solution: Communicate rebalancing with rationale.
Conclusion and How Anuj Desai & Associates Can Help
The model portfolio framework ensures transparency and compliance.
Anuj Desai & Associates offers specialized services to help RAs comply with model portfolio requirements:
- Review of model portfolio structure and content.
- Guidance on methodology and benchmarking.
- Compliance audit and advisory.
Contact us today to ensure your model portfolios comply with SEBI requirements. Our team will review your portfolios and provide a tailored compliance roadmap.
Disclaimer: This article is for informational purposes only and does not constitute legal advice. Readers are advised to consult qualified professionals for legal and compliance matters. Anuj Desai & Associates is a SEBI compliance consulting firm based in India.