Liquidity has been scarce in Indian capital markets in recent weeks. Mutual funds have also not been spared the pain, with liquid and money market funds seeing significant outflows over the past two months. Equity funds have been spared so far, apart from sporadic exits.
However, if the ongoing sell-off in the equity market continues, equity funds may not remain immune to redemption pressure. Is the liquidity position of funds, particularly in the mid- and small-cap space, healthy enough to face exits or are they vulnerable to sell-offs?
