SEBI-Mandated Stress Test

Sebi expressed concern about rising speculation in mid-cap and small-cap sectors, leading mutual funds to conduct and publish stress test results on their websites biweekly starting March 15.

The stress test evaluates how swiftly fund managers can liquidate small company stocks amidst high redemption demands and assesses whether this impacts stock prices significantly.

Sebi's objective with these stress tests is safeguarding investor interests by ensuring small-cap funds can manage sudden withdrawals effectively and have strategies in place for liquidity challenges.

Small caps receive scrutiny because their stocks may be harder to sell quickly, posing challenges for fund managers to meet redemption requests promptly compared to larger companies.

The disclosed results indicate the time required for funds to liquidate 25% and 50% of their assets, providing investors insights into the fund's liquidity and ease of withdrawals.