MF holding in commercial papers fall 24% from August high

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Published: July 20, 2019 1:39:22 AM

A fixed income manager said they don't want to take any risk now, and are investing in quality papers or treasury bills.

According to Pranav Haldea, MD of PRIME Database group, mutual funds have significantly reduced their exposure to CPs after the IL&FS crisis.

Mutual funds’ holding in commercial papers (CPs) in value terms stood at Rs 3.72 lakh crore in June 2019, down by 24.40% from an all-time high of Rs 4.92 lakh crore on August 31, 2018, show the data from primemfdatabase.com.

According to Pranav Haldea, MD of PRIME Database group, mutual funds have significantly reduced their exposure to CPs after the IL&FS crisis. The major MF exposure by value as on June 30, 2019 were in CPs issued by Nabard (Rs 24,989.50 crore), Housing Development Finance Corp (Rs 19,255.00 crore), Reliance Jio Infocomm (Rs 14,516.60 crore), Vedanta (Rs 14,478.80 crore), Reliance Retail (Rs 14,077.90 crore) and Power Finance Corp (Rs 12,966.30 crore), among others, show the data.

“Post the NBFC crises, mutual funds have reduced their exposure to CPs and even NBFCs are not coming out with shorter-tenure papers. This may be the reason why holdings of CPs have declined,” says Dwijendra Srivastava, CIO – debt at Sundaram Asset Management Company.

Sebi data show that in June 2019, mutual funds invested 1.01 lakh crore in CPs issued by NBFCs. Data from primemfdatabase also show that as on June, 97.08% of CPs held by mutual funds were rated A1+, while it was 95.25% in May 2019. A fixed income manager said they don’t want to take any risk now, and are investing in quality papers or treasury bills.

As per primemfdatabase data, holding of mutual funds in corporate bonds in value terms stood at `5.80 lakh crore on June 30, 2019, down 4.13% from `6.04 lakh crore as on May 31, 2019.

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