The Stress Test Mandate
Following the 2024 SEBI directive, all small-cap and mid-cap funds must disclose how many days it would take to liquidate 25% and 50% of their portfolio. As of April 2026, most large small-cap funds report 25% liquidation timelines under 10 days — an improvement from the 18-day averages seen in early 2024.
Which Funds Still Carry Risk?
A handful of smaller AMC small-cap funds still show 50% liquidation timelines exceeding 30 days. This signals concentrated bets in illiquid mid-micro cap stocks. Investors in these funds should weigh this against their own redemption needs.
What to Check
Look up your small-cap fund's latest stress test disclosure on its AMC factsheet. If the 50% liquidation window exceeds 25 days, factor that into your exit planning. It doesn't mean the fund is bad — but it means you shouldn't count on a quick exit during market stress.