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Jayshree P. Upadhyay
(Reuters) – Indian asset managers have published the results of stress tests on their mid- and small-cap portfolios, showing variations in the time it takes to liquidate the portfolios.
The Securities and Exchange Board of India (SEBI) has directed funds to disclose the results of these stress tests by Friday evening due to concerns over frothiness in small and mid-cap funds.
The six mutual funds published their results on their websites or sent them to investors late Thursday.
SEBI, among other things, requires funds to disclose the time taken to liquidate 50% and 25% of their mid- and small-cap portfolios.
If an equity fund is taking longer than the typical 2-3 days to return money to investors, it may be a sign that the fund’s portfolio is under stress.
Aditya Birla Mutual Fund said it would take five days to liquidate a quarter of its small-cap fund and two days to liquidate its mid-cap portfolio.
For Edelweiss Mutual Fund, similar liquidation times were two days for the small-cap fund and one day for the mid-cap fund.
The quantitative mutual fund said it would take 11 days to liquidate a quarter of its small-cap portfolio and three days to liquidate its mid-cap portfolio.
India has 27 small-cap funds and 24 mid-cap funds, managing 2.4 trillion rupees ($28.93 billion) and 2.1 trillion rupees, respectively.
For a fund to be classified as a small-cap fund, it must allocate at least 65% of its assets to small-cap stocks, with the remaining 35% potentially in cash or large-cap stocks. The same rules apply to mid-cap funds.
(1 dollar = 82.9590 Indian rupees)
(Reporting by Jayshree P Upadhyay; Editing by Dhanya Ann Thoppil)
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