Nippon India, Edelweiss, Quant, Axis and DSP declare results of stress test for small, mid cap funds

Several fund houses have declared the results of the stress test for their small-cap and mid-cap funds on March 14 evening. The Association of Mutual Funds in India (AMFI) had directed fund houses to conduct stress test on their mid- and small-cap schemes based on last month data and disclose the findings before March 15. 

The move comes on the back of market regulator SEBI’s concern over froth in these schemes amid relentless flow despite large fund houses restricting inflows due to lack of investment opportunity at right valuation.

Nippon India Small Cap Fund, which runs the biggest small-cap scheme with Rs 46,000 crore worth of assets under management (AUM), said it will need 27 days to sell off half of its portfolio. 

Edelweiss Mutual Fund said it would take two days to liquidate 50% of the portfolio in its mid-cap fund and just a day to liquidate 25%. In its small-cap fund, it said that it would take three days to liquidate 50% of its portfolio and two days to liquidate 25%. 

Quant Mutual Fund was the first to publish its stress test result. The fund said it will take six days to liquidate 50 percent of its portfolio for its Quant Mid Cap Fund and 22 days for the Quant Small Cap Fund. Time taken for 25 percent portfolio liquidation is three days for the Quant Mid Cap Fund and 11 days for the Quant Small Cap Fund.

Axis Small Cap Fund, with AUM of Rs 19,606 crore, said it will need 28 days to liquidate 50 percent of its portfolio.

DSP Small-Cap Fund, which has an AUM of Rs 13,703 crore as of February end, disclosed that it would take 32 days to sell off 50 percent of its portfolio. 

With the stress test, investors can clearly get a sense of how liquid their mutual funds assets are. It will also sensitise mutual fund managers to remain vigilant about liquidity and  be prepared for sudden redemptions.