Quant Mutual Fund has started feeling the initial ripple effect of the ongoing market regulator SEBI investigation into the front-running charges with some investors redeeming their investment in a knee-jerk reaction.

The net asset value most of the fund house’s schemes have declined despite markets remaining bullish. With trust being basis of mutual fund, many financial advisors have started recommending their investors to book profit.

The NAV of Quant PSU Fund fell by 1.09 per cent on Monday, while that of small-cap and mid-cap was down 0.66 per cent and 0.94 per cent, respectively. The NAV of Quant Active Fund declined by 0.69 per cent.

Other than the normal note from the fund house, there has been no communication or assurance from the SEBI or the Association of Mutual Funds of India and financial advisors do not want to risk their reputation by advising clients to stay invested in Quant MF schemes, said Avinash Karpe, a mutual fund distributor.

Himanshu Srivastava, Associate Director, Morningstar Investment Research India, said while investors can choose not to invest incremental money in these funds, an ideal approach will be to hold on to the existing investments.

Instead of knee-jerk reaction, he said investors can make more informed decisions once there is greater clarity on the situation as the case is still under investigation and no conclusions have been reached.

Wait and watch mode

SEBI has seized mobile phones and digital devices including computers after the search and seizure operation at Quant’s Mumbai headquarters and few investors’ premises in Hyderabad.

It is not yet clear whether crucial information was leaked by Quant MF or the broking firm through which it places orders, said sources.

Moreover, SEBI has to match the data provided by Quant MF and the orders placed by investors to establish the front-running charges.

“The dealing function of a fund house is particularly vulnerable to such mischief. However, that does not mean that a fund house is deliberately trying to deceive you. For the time being, the best thing is to do nothing. Wait for SEBI’s investigation process to cook and then make a decision,” said Value Research in a note.

However, Prime Investor in its note to the investors said that the allegations on Quant AMC may see redemption pressure on the company and a possible drop in the price of portfolio stocks allegedly used for front-running.

“We are now uniformly issuing an exit call on all the equity and hybrid funds of Quant AMC, whatever be their call earlier,” said Prime Investor.

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