Stress test: SBI MF can take up to 60 days to liquidate its small- and mid-cap portfolios

The year of 2023 was an average year though for both SBI Mid Cap Fund and SBI Small Cap Fund

SBI Small Cap Fund (SSCF) has broken records so far as far the stress tests are concerned. At Rs 25,533.78 crore, the scheme has reported that it would take up to 60 days to liquidate 50 percent of its portfolio. This is the highest number of days that any scheme has reported so far. In fact, it will take 30 days to liquidate 25 percent of its portfolio, also the highest number reported so far in the 25-day liquidity segment. At the time of going to print around noon of March 15, nearly 13 fund houses have reported their stress test numbers.

SBI Mid Cap Fund (SMCF) has reported that it would take 24 days to liquidate 50 percent of its portfolio. SMCF’s size is Rs 16,467.43 crore and is India’s 5th largest mid-cap fund. SSCF is India’s 3rd largest small-cap fund.

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Both the schemes have a small exposure to large-cap stocks as SMCF has a little under 8 percent and SSCF has 6 percent. The portfolios of both these funds are as much priced as those of their benchmark indices; in fact SMCF’s portfolio is over-valued (30.36 times) than that of its benchmark index (28.88 times). Both schemes have reported lower volatility numbers than their benchmark indices.

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Both SSCF and SMCF are part of MC30; Moneycontrol’s chosen of investment-worthy mutual fund schemes. And both schemes come with a good track record, their low liquidity numbers kept aside. The year of 2023 was an average year though for both SMCF and SSCF though. SSCF gave 25 percent returns, as opposed to an average of 41 percent by India’s 10 largest small-cap funds. SMCF gave a return of 34 percent, as against the top-10 average of 37 percent.

Also read | MF stress test: India’s biggest small-cap fund can sell off its 50% portfolio in 27 days

The objective of the stress testing exercise of AMFI is to make the average mutual fund investor aware of the risks and impact of market volatility on the liquidity of one’s equity portfolio, based on which one can take appropriate decisions to rebalance and redirect one’s liquidity and savings, as one deems fit.