Mutual Funds stress test result: 6 days required for 50% portfolio liquidation of Quant Mid Cap Fund

On March 14, Quant Mutual Fund released stress test results for its small-cap and mid-cap mutual fund schemes. The results indicate that it would take 22 days for 50% portfolio liquidation in the Quant Small Cap Fund and 6 days in the Quant Mid Cap Fund. For 25% liquidation, the timeframes are 11 days and 3 days for the small-cap and mid-cap funds respectively.

“Our Predictive Analytics tools endorse that there are no classic signs of euphoria in Indian equities at this point,” said Quant MF.

While there are areas of high valuation and excitement in certain parts of our market, we don't see significant risks in the mid and small-cap sectors. We continue to invest across market segments following our risk-mitigating VLRT investment framework and our "Active, Absolute & Unconstrained" investment philosophy. The trailing-twelve-month price-to-earnings (P/E) ratio for the benchmark Mid Cap 150 index is only slightly higher than it was one or two years ago. Although the benchmark Small Cap 250 index is trading above its level from a year ago, it's close to where it was two years ago, the fund house noted.

The data was made public following a directive from the Association of Mutual Funds in India (AMFI) and the Securities and Exchange Board of India (SEBI). They instructed asset management companies (AMCs) to perform stress tests on small and mid-cap schemes and share the outcomes by March 15.

As per the directive, the stress test needs to be conducted every 15 days, commencing from March 15. The results must be published on the AMCs' websites as well as on the AMFI's website.

Objective of stress testing

The purpose of this stress testing, conducted by AMFI on behalf of the regulator, is to educate mutual fund investors about the risks associated with market volatility and its impact on the liquidity of their equity portfolios. This information enables investors to make informed decisions about rebalancing and reallocating their investments according to their preferences.

Regarding market capitalisation and investor concentration, in the Quant Mid Cap Fund, holdings include 27.36% in large-cap stocks, 69.57% in mid-cap stocks, 0% in small-cap stocks, and 3.07% in cash. In the Quant Small Cap Fund, holdings consist of 28.36% in large-cap stocks, 0.24% in mid-cap stocks, 65.87% in small-cap stocks, and 5.53% in cash. Additionally, the top-10 investors hold only 2.99% of the Quant Mid Cap Fund and 2.10% of the Quant Small Cap Fund.

Edelweiss Asset Management Company released the stress test findings for its small-cap and mid-cap mutual fund schemes.

Disclaimer: The views and recommendations made above are those of individual analysts, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.