Nippon India Mutual Fund (NIMF) has released first stress test report of its Mid Cap fund – Nippon India Growth Fund. The result of the stress test for Nippon India Growth Fund shows how much time this scheme will take to sell its portfolio in case a large number of investors apply for redemption in a bad market condition.
Based on SEBI’s directive, the Association of Mutual Funds in India (AMFI) recently asked mutual fund asset management companies (AMCs) offering small and mid cap schemes to do the stress test.
The AMCs are also required to publish the stress test results on their websites as well as that of AMFI’s website once every 15 days, starting from March 15, 2024. With the help of stress test result, investors can become more aware about the risks and impact of market volatility on the liquidity of their portfolio.
Also Read: Nippon India Small Cap Fund Stress Test (March 2024): How much time will it take to liquidate?
Nippon India Growth Fund Stress Test Result
As per details of the stress test available on NIMF website, the Nippon India Growth Fund would need 7 days to sell-off half of its portfolio. It will take 4 days to liquidate 25% of its portfolio on a pro-rata basis. During calculation, time taken to liquidate portfolio on pro-rata basis, 20% of least liquid securities of the portfolio was ignored, according to the AMC.
“Stress test results given at column A and B above indicates number of days that will be required to liquidate 50% and 25% of the portfolio respectively on a pro-rata basis, under stress condition. While calculating the time taken to liquidate portfolio on pro-rata basis, the 20% of least liquid securities of the portfolio are ignored,” the AMC said.
“While it is not mandatory for AMCs to sell securities on pro-rate basis (i.e. sell securities in the same ratio as the portfolio composition), for the purpose of stress test it is assumed that Mutual Fund Scheme will sell the securities on pro-rata basis to ensure equal treatment to all investors of the scheme,” it added.
Nippon India Growth Fund has Rs 24480.78 crore worth of Assets under Management (AUM) till February 2024 end. It is among the top 10 mid cap schemes.
