In April 23, US-based Franklin Templeton announced a decision to wind up six debt mutual fund schemes in India owing to the liquidity crisis in the wake of the coronavirus outbreak. The news rattled investor confidence and, on April 28, five days later, credit risk funds witnessed one of the biggest single-day redemptions – the process of selling units – with assets under management (AUM) falling by ₹5,223 crore.
The episode busted the myth surrounding safety of debt funds. A debt fund invests in fixed income instruments such as bonds, corporate debt securities and money market instruments. In fact, credit risk funds (debt funds that mainly invest in low-rated securities giving high returns) saw a 36.53 per cent fall in AUM during April 23-May 20, the latest data released by the Association of Mutual Funds in India (AMFI) shows.
The Reserve Bank of India’s (RBI’s) ₹50,000 crore liquidity window for debt funds to manage redemptions prevented contagion but another shock is likely to aggravate the situation.
We look at some of the most affected debt fund schemes and categories to help you review your investments and take necessary steps.
Investors Worst-affected
Initially, Franklin Templeton tried to manage redemption requests by selling good quality paper, but the situation went out of control. “As AUM shrunk, the fund was left with a higher proportion of less liquid and probably riskier investments. It borrowed money to pay for redemptions but hit the regulatory limit for borrowing,” says Prateek Mehta, Co-founder of Scripbox, a mutual fund investment platform. After this, the fund had no choice, but to side-pocket the entire fund.
Diese Geschichte stammt aus der June 14, 2020-Ausgabe von Business Today.
Starten Sie Ihre 7-tägige kostenlose Testversion von Magzter GOLD, um auf Tausende kuratierte Premium-Storys sowie über 8.000 Zeitschriften und Zeitungen zuzugreifen.
Bereits Abonnent ? Anmelden
Diese Geschichte stammt aus der June 14, 2020-Ausgabe von Business Today.
Starten Sie Ihre 7-tägige kostenlose Testversion von Magzter GOLD, um auf Tausende kuratierte Premium-Storys sowie über 8.000 Zeitschriften und Zeitungen zuzugreifen.
Bereits Abonnent? Anmelden
"Focus on the challenge of each customer"
SHASHANK KUMAR MD & CO-FOUNDER I RAZORPAY Razorpay is India's first full-stack financial solutions company
PEDAL ON THE FUTURE
THE MG WINDSOR EV, WITH ITS FUTURISTIC AND MINIMALIST DESIGN, COMBINES THE BEST OF BOTH WORLDS-COMFORT AND TECHNOLOGY
BREATHE EASY
Whether you're battling allergies, looking to remove pollutants, or simply want to breathe easier, the right air purifier can make a difference
The Taste of India in a Glass
FROM ROYAL LIQUEURS TO DISTILLED MAHUA, INDIAN HERITAGE ALCOHOLIC BEVERAGES ARE HAVING THEIR DAY IN THE SUN
LOOK BEFORE YOU LEAP
IN 2025, INVESTORS WILL NEED TO FACTOR IN VOLATILITY ACROSS ASSET CLASSES
MISSING ADVISORS
INDIA HAS JUST ONE INVESTMENT ADVISOR FOR NEARLY EVERY 200,000 INVESTORS. AT A TIME WHEN RETAIL PARTICIPATION IN THE STOCK MARKETS IS BOOMING, THIS ASSUMES SIGNIFICANCE
TURNING A CORNER
SHARED ELECTRIC MOBILITY START-UP YULU'S SHIFT TO SERVICING THE QUICK COMMERCE SECTOR IS HELPING IT GROW FAST. IT IS NOW FOCUSSING ON IMPROVING ROAD SAFETY FEATURES AS IT TURNS EBITDA POSITIVE
REALITY CHECK
INDIAN STOCK MARKETS PLUNGED BEGINNING OCTOBER FOR A HOST OF REASONS, INCLUDING A FALL IN FII OWNERSHIP. HOW DEEP WILL THE CORRECTION BE?
TRUMP'S TRADE TANGO
The return of Donald Trump as the 47th President of the US has put the global economy on edge. India, too, is unlikely to remain unaffected. How will policymakers meet this latest challenge?
"The essence of the Trump administration will be transactional”
Global investor, analyst, and best-selling author Ruchir Sharma decodes why Donald Trump won the elections, what India should do, the risks, and more