Stress Test Results of MF- Should I stay Invested in Midcap & Small Cap?

 

Life itself has so much stress that in a recent study it has been found that approximately 5 million deaths worldwide are attributed to mood and anxiety disorders each year.  Further more  than 700 000 people die due to suicide every year. For every suicide, many more people attempt suicide. Now I am more under stress due to the market actions.

Now over and above all so much stress we have a Stress Test by SEBI for Mutual Fund Industry to find out did any AMC did investment in Illiquid stocks.  As an investor, I have one simple question the results are out of what my interpretation should be doing investing. Should I redeem my assets from Midcap and Small which I believe will play a big role when the Indian GDP grows beyond the 5 trillion mark? When the Indian GDP is rising and the growth is visible very Clearly over the next 5 to 10 years then the capping of 100 large caps and 150 stocks in the Midcaps space needs a significant revamp which goes without saying. It can't be like that that out of the BSE stock exchange's 5,311 listed companies, 5061 companies are small cap.  

  Now if the Industry is going to become a 1Rs.00 lakh cr industry in the coming 5 or 8 years where the allocation will be and how many stress tests will be required when the bucket is small. It seems the regulator needs to move ahead the curve from the traditional practices. In 2018 this classification was introduced then Indian was struggling with high NPA and NCLT& RERA was just being introduced and  over the past 6 years, there have been complete changes in Indian corporates.

When the Regulator raised the question about the AMCs investigating that did they investments in  illiquid stocks in Midcap and small cap Space then I must accentuate that every AMC have to file their investment reports and audit checks and balances are very much in place by the regulator why to create a panic for the common people who lost whopping over Rs 9 trillion in investor wealth has been lost due to this market correction, accounting for more than 50% of the total value destruction. A country where out of 140 cr people only 5% have Equity Investments and the same country does not have any social coverage or retirement benefits but rather just being self-reliant on its own financial planning. Further this 5% number came up in the last 3 years before that it was 2.2% only.

Now if the Indian population of investors in equities increases to 10% 50% of the sharing comes through Mutual Funds and 50% of the same flows in MF comes in midcap and small cap then what will be the condition of the fund managers of the AMC where they will invest that corpus when only 150 companies are midcap and rest is all small cap. They will have no other alternative but to invest in a small cap as per SEBI classification.  

When IILFS went for toss followed by DHFL, and PMS bank where were these stress tests from the coffers of SEBI. Why could they not find the stress at that time? The biggest loser of this stress test is the common investor who saves money to plan his dreams? Investor protection has become a joke.

Coming back to the main question what an investor should make out of this report enclosed above. It is just like a machine but without a manual. The biggest disadvantage of this type of half-hearted work is that financial planning which includes the most goals of life (child education, retirement planning, buying a house) goes upside down. In a country where the number of financial advisors and MFDs is very low compared to the population number.  Miss-selling and misguiding will begin due to stress test reports which will be interpreted in many ways without any benchmark of understanding. I am a simple investor I don't understand liability assets in AMC language and hence how will I evaluate this report.? If this stress test was for investors like us then what is the end result?  

Now many financial advisors will take advantage of the report and will misguide.  Particularly the banks since in a country of 140 billion even half the population does not Bhagwat Gita. They are dependent on TV serials to gain knowledge of Bhagwat Gita.

Now post this report has come out it seems who will liquidate first the AMC or the client from the scheme since it's a half-hearted activity. It is just replicating the US banking stress test which also failed to enlighten people where they should park their money even if the government can’t back it. 

In a recent presentation, the SEBI chief was recommending to invest in REITS and INVITS well how many people understand the same and how many sessions have been done to educate investors to invest in REITS and INVITS. My biggest question as an investor is will REITS & INVITS will help me to plan my financial goals and objectives. Will I be able to have an early retirement? 

Now which mutual fund should I sell and which I should keep and increase my allocation post the stress test results. Is my advisor correct to analyse the result and guide me since there is no manual?