The latest stress test done by mutual fund companies show that most small-cap fund schemes have reduced the number of days taken to liquidate of the portfolio in case of sudden redemption due to crash in the market.

Per the second month of the stress test on these funds, SBI Smallcap funds — which has asset under management of ₹25,434 crore — has reduced the time taken to offload 50 per cent and 25 per cent of its portfolio to 58 and 29 days, respectively, last month against 60 days and 30 days in February.

Similarly, small-cap of Quant MF was down at 20 and 10 days against 22 and 11 days taken in February. It has an AUM of ₹17,383 crore (₹17,233 crore).

With an AUM of ₹6,236 crore, Tata small-cap fund will take 29 and 15 days against 35 and 18 days reported in February.

The fall in number of days to offload small-cap portfolio comes on the back of sharp fall in major small-cap benchmark indices and reduced inflows.

The Nifty 200 index was down five per cent at 14,330 as of March-end against 15,061 on March 1. BSE Smallcap index was also down by five per cent to 43,166 points against 45,532 points last month.

However, small-caps of Nippon India MF and HDFC MF reported marginally higher number of days to offload 50 per cent and 25 per cent. Nippon Small Cap and HDFC Small Cap fund reported that they will take 29 and 15 days (27 and 13 days) and 44 and 22 days (42 and 21 days). Both the fund houses have registered a fall in small-cap AUM to ₹45,248 crore (₹46,030 crore) and ₹27,573 crore (₹28,597 crore).

The outcome of stress test on mid-cap schemes was a mixed bag with SBI MF and HDFC MF registering a marginal increase in time taken to offload their mid-cap asset; while Kotak MF, DSP MF, Axis MF have reduced the time taken to offload thier asset in case of panic redemption.

For the first time in 2.5 years, small-cap funds have witnessed outflow of ₹94 crore while mid-cap funds saw a 43 per cent month-on-month decline to ₹1,018 crore in March.

Gopal Kavalireddi, Vice-President of Research at FYERS, said the notable highlight of March data was the net outflows of ₹94 crore from small-cap funds for the first time since the start of the small-cap bull run at the beginning of the year.

Owing to large valuation gap, smart investors initiated a portfolio rebalancing in January and continued the shift over the last two months, he said.