Debt mutual funds cut exposure to NBFC sector

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Mumbai | Updated: June 1, 2019 2:22:01 AM

The data from Sebi shows that debt mutual funds have invested over `13.91 lakh crore in various debt segment in April 2019. Out of total amount, `6.77 lakh crore has been invested in debt papers maturing less than 90 days while 4.62 lakh crore is invested in long duration instruments of more than one year and above.

Debt mutual funds’ exposure to non-banking financial companies (NBFCs) has come down by `58,000 crore since the liquidity crises began in July last year, and it currently stands at `2.06 lakh crore. A report by CARE Ratings on mutual funds says that the percentage share of funds deployed by mutual funds in commercial papers (CPs) of NBFCs in April 2019 was at 7.26% and the amount held was `1.01 lakh crore.

“While the amount has reduced, the percentage share also dropped from 19.04% in July 2018 to 14.81% in April 2019. After the liquidity crisis triggered in the NBFC space, MFs withdrew almost 36% of their investments from CPs of NBFCs,” said the report. The data from Securities and Exchange Board of India (Sebi) shows that, mutual fund had invested `1.57 lakh crore in CPs of NBFC in July last year.

The crises in NBFC sector started in July last year, after defaults by Infrastructure Leasing & Financial Services (IL&FS), which led to liquidity crunch in the system. “The largest share of funds deployed by debt mutual funds are in short-term duration instruments of less than 90 days, followed by long duration instruments of 33.3% and 12.9% funds are parked in instruments with maturity from 182 days to 1 year. The remaining 5.1% is parked in instruments with maturity from 90 days to 182 days,” says the CARE Ratings report.

The data from Sebi shows that debt mutual funds have invested over `13.91 lakh crore in various debt segment in April 2019. Out of total amount, `6.77 lakh crore has been invested in debt papers maturing less than 90 days while 4.62 lakh crore is invested in long duration instruments of more than one year and above. “Corporate debt papers have the highest fund exposure of `4.2 lakh crore, with a share of 30% in debt mutual funds in April 2019. The exposure has reduced by `14,000 crore over the previous month. This segment includes floating rate bonds, non-convertible debentures, etc.”

Commercial papers have the second highest exposure of `4.09 lakh crore, with a share of 29%, a growth from 27% in previous month. Funds deployed in bank certificate of deposit and G-Secs are stable with shares of 15% and 4% respectively in Apr 2019.

On the equity side, banks, finance, software, consumer non-durables and petroleum products were the top 5 sectors where equity MFs deployed their funds in April 2019 and they cumulatively accounted for approximately 55% share.

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