Fund houses' stress testing has shown that larger participants in the mid-and small-cap space would be more vulnerable.If there is a substantial redemption, two of the biggest fund companies, HDFC MF and SBI MF, which handle assets valued at ₹28,597 crore and ₹25,534 crore, respectively, will need 42 and 60 days to sell half of their holdings.
It will only take three days for smaller players, like Edelweiss MF, to sell 50% of their small-cap holdings. Investors anticipate a two- to three-day return on their investment, therefore a delay in selling assets might cause a delay in their money's return.
A quarter of the fund houses' small-cap portfolio may be sold in as little as one day, while a quarter of their mid-cap assets can be sold in as little as seventeen days.
An equities fund may have significantly less liquidity if it takes longer than the typical two to three days to refund investors' money, according to Kaustubh Belapurkar, manager for research at Morningstar India, a company that specializes in mutual fund research.
"These numbers will act as a clear indicator for managers whether they should opt for a soft closure of these funds by stopping inflows."
Fund houses were instructed by AMFI to conduct a stress test on these schemes and report the results by Friday. The stress test was conducted because of the persistent infusion of money into these schemes, which was mostly supported by ordinary investors seeking big returns, raising concerns about foam in the market.
