For the third consecutive month, mutual fund houses have disclosed the level of free float available in their miniature and mid-cap schemes to show the level of liquidity in their schemes.
For the uninitiated, capital markets regulator Sebi had in March ordered mutual fund houses to conduct a monthly so-called ‘stress test’ in view of the inflow of froth in miniature and mid-cap mutual funds.
The latest stress test conducted last month showed that these funds will take between one and 54 days to liquidate half (i.e. 50 per cent) of their investments in small-cap schemes.
Petite Cap Programs
The Axis Petite Cap program would take 25 days to redeem 50 percent of its portfolio and 12 days to redeem 25 percent of its assets.
The longest time taken to liquidate half of the portfolio in the miniature cap program is 54 days in the case of HDFC Petite Cap fund and 27 days in the case of 25%. assets.
This is followed by 48 days required by SBI Petite Cap Fund to liquidate 50 per cent of assets and 24 days for 25 per cent of assets.
READ ALSO | From March 4, Kotak Mutual Fund is restricting inflow of funds into the small-cap scheme. Details here
The relevant period required by the DSP Petite Cap Fund is 35 days and 17 days to liquidate 50% and 25% of the portfolio.
The appropriate number of days required for Kotak Petite Cap Fund is 35 days (for a 50% portfolio), for Nippon India Petite Cap Fund it is 31 days.
In case of Quant Petite Cap fund it is 22 days and in case of Tata Petite Cap fund it is 23 days.
| Petite-cap investment funds | April (50% of portfolio) | March (50% of portfolio) |
| HDFC Petite Cap Fund | 54 | 44 |
| SBI Petite Cap Fund | 48 | 58 |
| DSP Petite Cap Fund | 35 | 32 |
| Kotak Petite Cap Fund | 35 | 34 |
| Nippon India Petite Cap Fund | 31 | 29 |
| Axis Petite Cap Fund | 25 | 27 |
| Quant Petite Cap Fund | 22 | 20 |
| Tata Petite Cap Fund | 23 | 29 |
(Source: AMFI; number of days to liquidate half of the portfolio)
As seen in the table above, liquidity has improved only in three funds: Axis Petite Cap Fund, SBI Petite Cap Fund and Tata Petite Cap Fund.
Meanwhile, the stress test revealed that liquidity in other mutual fund schemes has further reduced. For example, the number of days has been increased from 44 to 54 days for the HDFC small-cap fund to liquidate half of its assets.
READ ALSO | Mutual Fund Stress Test: Liquidity in small-cap funds is improving, albeit marginally
Similarly, the corresponding data for the Quant Petite Cap fund increased from 20 to 22 days.
It is worth mentioning that some small-cap funds have achieved returns of up to 70% over the last year. As a result, Tata Mutual Fund and Nippon Mutual Fund restricted inflows into their small-cap schemes last year, and Kotak Mutual Fund introduced similar restrictions in February this year.
All mutual funds are now expected to publish the results of stress tests on their official portals and the AMFI website on a monthly basis. It first started on March 15.
Posted: May 25, 2024 7:12 PM EST
