Have small cap mutual funds become any safer now? The latest stress test, it appears, doesn’t reflect that. The test for March indicates that it will take as long as 25-57 days to liquidate 50 per cent of the portfolio of high-risk small cap mutual funds. Most of these schemes have anywhere between 65 and 89 per cent of their portfolio invested in small cap stocks. Notably, small cap funds are supposed to invest a minimum of 65 per cent of their assets in small caps.
Based on information provided by the Association of Mutual Funds in India (AMFI) on their website, we have compiled a list of the most illiquid small cap mutual fund schemes.
According to the table below, it will take 25 days for the Axis Small Cap Fund to sell half of its holdings, and 13 days for the fund to sell 25% of its holdings.It will take up to 57 days for HDFC Small Cap Fund to sell off half of its holdings, and 28 days for it to sell off 25%. In contrast to the DSP Small Cap fund, which has 89 percent of its assets invested in small cap stocks, this plan has 80 percent of its assets invested in small size equities.
The schemes with over 80 per cent of their assets allocated to small cap stocks are Tata Small Cap Fund, HDFC Small Cap Fund, and DSP Small Cap Fund.
What is a stress test?
For those who are unaware, every month all mutual fund firms are required to present the results of stress tests for their small and mid-cap mutual fund schemes.
This is in accordance with the capital market regulator Sebi’s rule, which mandated that all fund companies publish the results of stress tests by the 15th of each month using data from the previous month. Thus, the data for the previous month is revealed by the data released on April 15, 2025.
Each month, this information is intended to be posted on AMFI’s website. The action was done in response to the surge in small and mid-cap stock values. The initial revelation took place on March 15, 2024.
The number of days needed to liquidate 50% and 25% of the portfolio, respectively, on a pro rata basis under stress conditions is shown by the results of the stress test. When figuring out how long it took,
