Mid-cap to small-cap equity schemes - what mutual fund stress test revealed - Hindustan Times

Mid-cap to small-cap equity schemes - what mutual fund stress test revealed

Apr 16, 2024 01:58 PM IST

Mutual fund stress test exercise has revealed improvements, especially in Tata MF Small Cap Fund, and Canara Robeco Small Cap Fund.

Mutual funds have been growing steadily over the years and as more and more retail investors jump on this bandwagon, things are set to improve further. However, considering the safety, risk and other factors, mutual funds have to reveal data across a number of parameters including valuation, liquidity, portfolio turnover and more. This applies to mid-cap and small-cap equity schemes and the date for that is the middle of the month - 15th. Notably, overall, there have been no alarming situations revealed in the latest results.

Overall, there have been no alarming situations revealed in the latest mutual fund stress test results.(Image credit: Pexels)
Overall, there have been no alarming situations revealed in the latest mutual fund stress test results.(Image credit: Pexels)

In the 2nd batch of this stress test, some improvements were seen in the overall liquidity positions of small-cap funds. According to a MoneyControl report, it would take an average of 13.74 days as of March end to liquidate half of their schemes vis a vis 14.03 days in the previous month.

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While this is the overall situation, on the basis of individual schemes, there is a big change in some.

Tata MF Small Cap Fund, which has a corpus of around 6,300 crore, the going was tough as its numbers indicated in the first-ever stress-test results. MoneyControl said, it would take 18 days for the scheme to sell 25 percent and 35 days to sell 50 percent of its portfolio.

In general, a scheme of this size was reported to take under 1/3rd of the time to liquidate half of the portfolio.

However, the latest data shows a massive positive change in this small cap indicating it would now take 29 days to liquidate 50 percent of its portfolio and 15 days to liquidate 25 percent.

Canara Robeco Small Cap Fund reported an improvement too. It said it would reach the 50 percent liquidation period for half its portfolio in 8 days from the earlier 14. At the same time, 25 percent liquidation mark would happen within 4 days now against the earlier 7.

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MoneyControl quoted Nirav Karkera, Head of Research at Fisdom as saying, “In the small-cap category, we haven't seen significant downward changes. Even the largest funds by AUM have only experienced a slight increase of two days to liquidate 50 percent and 25 percent of the portfolio.”

Even more than that Karkera indicated that improved liquidity days were seen in seven small-cap funds for their 50 percent portfolios and out of those as many as 4 are in the top 10 AMCs.

Among the large-cap funds' results last time around, SBI MF took the longest to liquidate 50 percent of its SBI Small Cap Fund portfolio. Now, from 60 days it has improved to 58 days as inidicated by the latest numbers. The sale of 25 percent of its portfolio, it would take 29 days against the previous 30.

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While this was an improvement, Nippon India Small Cap Fund and HDFC Small Cap Fund indicated they would now need 2 extra days to liquidate half of the portfolio. Previously, for Nippon India Small Cap Fund, it took 27 days. And for HDFC Small Cap Fund it took 44 days. Things have changed as per the latest results

HDFC Mid-Cap Opportunities Fund, the biggest in the segment, would take 24 days against 23 days earlier to liquidate 50 percent of the portfolio.

On the other hand, Kotak Emerging Equity Fund would take 30 days against the previous 34 and Axis Midcap Fund would take 10 days against the previous 12.

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