Stress Test: HDFC MF’s Rs 28,600 crore small-cap fund to take 42 days for 50% liquidation

Among the top 10 funds, HSBC Mutual Fund was yet to declare the results of mutual fund stress test.

HDFC Small Cap Fund, the second-biggest in the category with Rs 28,599 crore worth of assets under management (AUM), would require 42 days to sell off half of its portfolio. This is the second highest among the top-10 small-cap funds behind SBI Small Cap Fund, which would take 60 days for 50 percent liquidation.

Notably, Nippon India Small Cap Fund, India’s biggest small-cap scheme with Rs 46,000 crore worth of AUM, would require 27 days to sell off half of its portfolio.

Among the top 10 funds, HSBC Mutual Fund was yet to declare the results of mutual fund stress test.

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In the mid-cap segment, HDFC Mid-Cap Opportunities Fund, which is the biggest in the category with Rs 60,187 crore AUM, would take 23 days to liquidate 50 percent of the portfolio, while 25 percent liquidation can be done in 12 days.

In terms of portfolio concentration, 3.01 percent of HDFC Small Cap Fund's assets are held by top 10 investors, while it was 1.41 percent in the case of HDFC Mid-Cap Opportunities Fund.

On the allocation side, HDFC Small Cap Fund and HDFC Mid-Cap Opportunities Fund had 10.56 percent and 6.80 percent exposure, respectively, in cash, which is among the highest in the top-10 schemes in both categories.

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In terms of asset allocation, HDFC Small Cap Fund had 4.74 percent, 7.68 percent and 77.03 percent in large-cap, mid-cap and small-cap stocks, respectively.

In HDFC Mid-Cap Opportunities Fund, the allocation to large-cap, mid-cap and small-cap stocks stood at 12.97 percent, 65.69 percent and 14.54 percent, respectively.

When it comes to the volatility analysis, the annualized standard deviation for the HDFC Mid-Cap Opportunities Fund stood at 13 percent against 14.67 percent for the benchmark.

In the case of HDFC Small Cap Fund, the annualized standard deviation was 15.27 percent as of February end against 17.16 percent for the scheme benchmark.

In mutual funds, standard deviation tells investors how much the return from the mutual fund portfolio is straying from the expected return, based on the fund's historical performance.

Also read | SBI MF can take up to 60 days to liquidate its small- and mid-cap portfolios

The Beta ratio for the HDFC Mid-Cap Opportunities Fund was 0.86 and 0.85 for the HDFC Small Cap Fund.

Beta denotes the sensitivity of a mutual fund scheme towards market movements. A beta less than 1 denotes lower volatility and higher than 1 denotes more volatility compared to the benchmark index.

After the Securities and Exchange Board of India raised concerns about “froth” building up in mid and smallcap segments through its February 27-28 communications, the Association of Mutual Funds in India (AMFI) asked asset management companies to conduct stress tests and publish the results on their websites as well as that of AMFI once every 15 days starting March 15.

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The objective of the test is to make mutual fund investors aware of the risks and impact of market volatility on the liquidity of their equity portfolio to help them take appropriate decisions to rebalance and redirect liquidity and savings.