The mutual fund (MF) industry recorded its first outflow in smallcap schemes after a gap of 30 months and investors are now waiting for the results of the second round of the Sebi-mandated stress test results due by April 15.

Leading to outflow in smallcap funds following warnings of froth by Sebi, asset management companies (AMCs) announced the first such stress test result on March 14-15 mentioning the number of days they will require to liquidate 50% and 25% portfolio of their mid-cap and smallcap schemes.

The small and midcap space has been in the limelight in the last few months as many of the less tracked stocks have given multibagger returns despite valuation-related warnings by brokerages. The smallcap boom caught Sebi’s attention when it told MFs to put a framework in place to protect retail investors in case of a market crash.

The market regulator stated that the policy should include but not be limited to moderating inflows, portfolio rebalancing, etc., and take steps to ensure that investors are protected from the first mover advantage of redeeming investors.