MF stress test impact: Stocks that larger-sized smallcap funds increased exposure in March
The liquidity disclosure requirement is unlikely to impact the portfolio construction of the midcap and smallcap funds. Provided, there's a chance that fund managers may increase their holdings in stocks with higher liquidity to be in a better position to compete within the category
Mutual fund companies now routinely disclose the stress tests results of their midcap and smallcap funds by 15th of each month, as instructed by the market regulator SEBI. The purpose of the stress tests is to reveal the latent risk in the invested midcap and smallcap space and assess a fund's readiness in the event of an unfavourable scenario. The regulator has been concerned over the frothy valuation in the mid and smallcap segments. The disclosure reveals that funds with larger asset size could take longer to liquidate their portfolio compared to that of smaller-sized funds. Interestingly, within the larger size smallcap funds, few funds have reported taking relatively shorter days to liquidate their portfolio. While the liquidity disclosure requirement is unlikely to impact the portfolio construction of the midcap and smallcap funds, there's a chance that fund managers may increase their holdings in stocks with higher liquidity to be in a better position to compete within the category. To be sure, going forward, any new addition to the portfolio will necessitate improved liquidity management. Here are the lists of stocks wherein the larger asset sized smallcap funds increased their exposure notably in March. Source: ACEMF.
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Nippon India Small Cap Fund Corpus: Rs 45,749 crore
