Nippon India Mutual Fund (NIMF) has released the first stress test report of its small cap fund. The result shows how much time this fund will take to sell its portfolio in case a large number of investors apply for redemption in a bad market condition.

The Association of Mutual Funds in India (AMFI) recently asked mutual fund houses offering small and mid cap schemes to do the stress test and publish the 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 Growth Fund Stress Test (March 2024): How much time will it take to liquidate?

Nippon India Small Cap Fund Stress Test Result

As per details of the stress test available on NIMF website, the Nippon India Small Cap Fund would need 27 days to sell-off half of its portfolio. It will take 13 days to liquidate 25% of its portfolio on a pro-rate basis. While calculating the time taken to liquidate portfolio on pro-rata basis, the 20% of least liquid securities of the portfolio was ignored, according to the fund house.

“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.

Also Read: SBI Small Cap Fund Stress Test Result

Nippon India Small Cap Fund is India’s biggest small-cap scheme with Rs 46,000 crore worth of Assets under Management (AUM). The scheme holds over 200 stocks. As of now, Nippon India Small Cap Fund is not accepting fresh lump sum investments.

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