Now Reading: Small-cap funds may take 28 more days to sell half their portfolio than mid-caps
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Small-cap funds may take 28 more days to sell half their portfolio than mid-caps
Small-cap funds may take 28 more days to sell half their portfolio than mid-caps
SEBI’s FY26 annual report reveals significant liquidity risks in small-cap mutual funds. The top 10 small-cap schemes required an average of 38 days to sell half their portfolios during March 2026, while…
The Story in Brief
SEBI’s FY26 annual report reveals significant liquidity risks in small-cap mutual funds. The top 10 small-cap schemes required an average of 38 days to sell half their portfolios during March 2026, while top mid-cap schemes needed just 17 days, Livemint reports. For the top five schemes, the gap widened further: small-caps took 51 days versus 23 days for mid-caps.
Experts attribute the disparity to small-caps' mandated 65% allocation to stocks with lower market depth and trading volumes, making large sell-offs harder without price impact. This vulnerability has caught investors' attention as it could force fund managers to sell at lower prices during downturns or heavy redemptions.
The Indian Opinion
The narrative that mutual funds are a safe, one-size-fits-all product for retail investors has taken another hit. Small-cap funds with large asset bases now show liquidity risks that can hurt both exiting and staying investors. But this is not a reason to panic-exit. The real test is whether a fund's liquidation period has been rising consistently month on month. Investors should use AMFI's monthly stress-test data alongside stock-level concentration and cash holdings. The question to ask: is your fund manager holding stocks you could not sell in a hurry?
Source: livemint.com
This story was synthesised by AI from the source linked above.
