Are small cap mutual funds safer now to invest? This is what the latest stress test reveals

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stress test’ every month in view of the froth in small and mid-cap mutual funds.The latest stress test for the last month revealed that these fund houses will require anywhere between one to 54 days to liquidate half (i.e., 50 percent) of their invesment in small cap schemes.Axis Small Cap scheme would need 25 days to redeem 50 percent of its portfolio and 12 days to redeem 25 percent of assets.The longest time required to liquidate half of the portfolio in small cap scheme is 54 days by HDFC Small Cap fund and 27 days for 25 percent of the assets.This is followed by 48 days required by SBI Small Cap Fund to liquidate 50 percent of assets and 24 days for 25 percent of assets.ALSO READ | Kotak Mutual Fund restricts flows into small cap scheme from March 4. Details hereThe corresponding time period required by DSP Small Cap Fund is 35 days and 17 days to liquidate 50 percent and 25 percent of portfolio.The corresponding number of days required by Kotak Small Cap Fund is 35 days (for 50 percent portfolio), for Nippon India Small Cap Fund, it is 31 days.For Quant Small Cap Fund, it is 22 days and for Tata Small Cap Fund, it is 23 days.(Source: AMFI; number of days to liquidate half of portfolio)As one can see in the table above, the liquidity has improved in only three schemes: Axis small cap fund, SBI small cap fund and Tata small cap fund.Meanwhile, the stress test revealed that the liquidity has further declined in other mutual fund schemes.