Comments
The Amtek Auto default has resulted in panic redemptions from mutual fund investments in corporate debt in September. According to data published by industry body AMFI, fixed income funds — which include the ultra short-term category of JP Morgan AMC’s troubled funds — saw unprecedented outflows of ₹26,717 crore in September alone.
In contrast, the AMFI had reported net inflows for the previous months this year. For example, in July the AMFI had reported net inflow of ₹5,861 crore in June, ₹21,713 crore in July and ₹12,671 crore in August.
A fixed income fund manager at a top fund house attributed the large September outflow to redemptions at JP Morgan and ₹10,000 crore from Franklin Templeton.
Ultra liquid funds account for about half of the assets in the ₹4 lakh crore fixed income category. Concerns about the credit quality of corporate paper, particularly in core sectors that have already sent their lenders in the banking sector reeling, have prompted exits from this category, the fund manager said.
SEBI’s advise At a recent meeting between the fund industry and the capital market regulator, UK Sinha, Chairman, SEBI, reportedly asked investment managers why their research into corporate debt was not as rigorous as it was in equity.
Against the backdrop of Amtek Auto defaulting on its debt in August, to which JP Morgan AMC had an exposure of about ₹200 crore, Sinha told managers to do their own due diligence as well, and not just depend on reports from credit rating agencies. While this will make research more robust, a senior fund manager in the fixed income segment says events such as Amtek Auto default are market risks that arise occasionally. “Despite the default, JP Morgan has managed returns of about 7-8 per cent, where other fixed income schemes might have done 10 per cent.”
Equity continued to see sustained inflows of over ₹5,000 crore through September, taking the total assets under management to over 13.15 lakh crore for the first time in its history. Balanced funds saw an inflow of ₹2,000 crore and ₹1,183 crore came into gilt funds. Liquid and money market schemes saw the periodic end-of-quarter withdrawals by corporate investors, with redemptions crossing ₹60,000 crore.
Comments
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.