Stress testing framework for mutual funds (2024)

Tue, 19 May 2026 00:00:00 +0000

SEBI’s 2024 stress testing framework requires mutual fund schemes, particularly small-cap, mid-cap, and credit-risk funds, to conduct periodic liquidity stress tests and disclose redemption-stress recovery timelines. The framework was introduced in response to concerns about scheme liquidity under adverse market conditions, building on the lessons of the Franklin Templeton April 2020 wind-up and other credit-stress events.

For Indian retail investors holding equity small-cap, mid-cap, or credit-risk schemes, the new framework provides transparency on how quickly the AMC believes it could meet redemption pressure under stress.

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 .

Stress Testing on WebNotes

Stress testing framework for mutual funds (2024)

SEBI mutual fund stress testing framework of 2024