Quant Mutual Fund on March 14 tried to assuage investor concerns after releasing the SEBI-mandated stress test results, saying that there are no classic signs of euphoria in Indian equities at this point.
“While there are some pockets of high valuation and even frenzy in certain segments of our market, we do not perceive bigger risks in the mid and small-cap space and we continue to invest across market segments,” said Quant MF.
The stress test result showed that it would take 22 days for 50 percent portfolio liquidation in Quant Small Cap Fund, and 6 days in the Quant Mid Cap Fund, the fund house added. For the 25 percent liquidation, the fund would take 11 days and 3 days in its Small Cap and Mid Cap funds, respectively.
Also Read: MF Stress Test: Here is how stress is calculated and the logic behind it
Quant MF has stated that its 'Predictive Analytics' suggests a shift from a favourable bull-run phase to a more challenging one. However, amidst this transition, recent capitulation in the mid and small cap segments of the market indicates a tipping of the risk-reward equation towards a more advantageous territory.
The results of the stress test and liquidity analysis are as of February 29, 2024. The portfolio trailing twelve-month P/E ratio is 24.35 for the quant Mid Cap Fund and 21.52 for the quant Small Cap Fund versus 26.96 and 28.85 for the respective benchmarks. Quant’s portfolio turnover ratio is 3.65 for the quant Mid Cap Fund and 1.69 for the quant Small Cap Fund.
In response to SEBI's concern regarding the froth building in mid-cap and small-cap segments of the stock market, the Association of Mutual Funds in India (AMFI) instructed mutual funds to perform stress tests and disclose the outcomes on both their websites and AMFI's every 15 days.
Also Read: MF Stress Test: Why it matters and should investors be worried?
The purpose of the stress test is to ascertain how soon fund managers can liquidate their portfolios if investors were to rush for redemptions under adverse market conditions.
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