Vodafone Idea Papers Issue Impact Debt MF Schemes

Vodafone Idea Papers Issue Impacts Debt MF Schemes

Debt MF Investors Worried Regarding Vodafone-Idea Exposure Issue

At the end of September 2019, Vodafone Idea posted a loss of nearly Rs 51,000 crore. Moreover, the debt MF schemes have exposure over  Rs 2,629 crore to the Vodafone Idea papers. Currently, bad time runs for these entities as well as related investors. The market experts said that it may impact the debt MF investors. 

Investment experts considered that Vodafone Idea exposure does not affect debt MF investors who have below 5% exposure. If your schemes under debt funds have more than 5 percent exposure then try to exit from those schemes. 

Investors who have 1 to 3 percent of exposure to their schemes will face limit risk. For example, a person has 1 percent of exposure then the net asset value will reduce by 0.1 percent. So there is no need to exit from the scheme. If he has the best investment track record will continue with such scheme even have 3 percent of exposure. 

According to the report, many mutual fund houses have begun the side-pocketing process to deal with the issue. Side pocketing will allow MF houses to separate bad assets in debt MF schemes. But, there has not been any default. 

A source said that the debt schemes which hold Vodafone Idea papers have not yet market down any of these securities. However, a below investment grade requires MFs to drag down certain assets.

Financial experts clear that investors should not lose money even you have 3 percent exposure. In any change, the scheme will diversify, then the NAV will balance by other securities. 

“Last but not least, investors should shift your investments to another safe scheme when you have more than 5 percent exposure,” said experts.

Disclaimer: This article offers information regarding the expert view. Recommended schemes and investment tips are given in this article are the expert’s own and not that of the website or its management.

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