Liquidity Risk on WebNotes

SEBI mutual fund stress testing framework of 2024

Sat, 16 May 2026 00:00:00 +0000

The SEBI mutual fund stress testing framework of 2024 is the regulatory framework introduced through SEBI Circular SEBI/HO/IMD/IMD-PoD-1/P/CIR/2024/14 dated 27 February 2024 that requires asset management companies (AMCs) managing small-cap and mid-cap mutual fund schemes to conduct monthly portfolio-liquidity stress tests and publicly disclose the estimated number of business days required to liquidate 25 per cent and 50 per cent of their small-cap and mid-cap portfolios under prevailing market conditions. The framework was SEBI’s policy response to the substantial inflows into small-cap and mid-cap funds during 2022 to 2023, which had produced concerns about liquidity mismatch between the open-ended scheme structure and the underlying market-cap segment’s daily trading liquidity. The framework is anchored in the SEBI (Mutual Funds) Regulations, 1996 and is administered by the SEBI Investment Management Department .

SEBI swing pricing framework for debt mutual funds (India)

Tue, 12 May 2026 00:00:00 +0000

Swing pricing in the context of Indian mutual fund regulation is an anti-dilution mechanism that adjusts the NAV at which large redemptions or subscriptions are processed to reflect the market impact cost (transaction cost) that the redemption or subscription imposes on the existing portfolio. SEBI introduced a framework for swing pricing in debt mutual funds through circular SEBI/HO/IMD/IMD-PoD-1/P/CIR/2022/87 dated 27 June 2022, with the full rollout originally scheduled for 1 March 2023. The mechanism was subsequently revised for phased implementation. Swing pricing addresses the “first-mover advantage” problem in debt funds, where investors who redeem early in a market stress episode benefit at the expense of long-term holders who remain in the fund and bear the full liquidation costs. The framework is grounded in the SEBI (Mutual Funds) Regulations, 1996 and is administered by the SEBI Investment Management Department .