Stress testing

Evaluating equity funds is a good idea

The Securities and Exchange Board of India (Sebi) is looking to comprehensively stress-test equity mutual fund schemes and put in place mitigating measures to handle potentially dangerous situations. This is a relatively new initiative on the part of the regulator, but it follows the first round of stress tests, which is said to have resulted in unsatisfactory outcomes. There is a fair logic behind the policy move of instituting more comprehensive stress testing. Equity funds continue to draw huge inflows and most of these emanate from retail investors — indeed, the bulk of the equity assets under management is held