Mutual Fund investors fortunes eroding

The NAV of Kothari Pioneer’s Infotech scheme with dividend option was at Rs 42.50 on February 21 saw a slide of 48 per cent to Rs 22.10 while the same scheme with growth option slumped 41 per cent.

The Aditya Birla group’s flagship mutual fund scheme Birla Advantage which was at Rs 76.13 on February 21 came down to Rs 44.92 almost eroding investors investment by 36.12 per cent. The fund’s IT scheme with dividend option fell by 31.65 per cent (see table).

"I have invested all my retirement benefits in various mutual funds. The heavy speculations prevents me from playing the market directly, so I take the mutual fund route. But the recent erosion of investors value has really put me on backfoot," said R Srinivasan, a regular mutual fund investor.

The recent interest rate cut on the fixed deposit by banks also saw many of the small timers to opt for mutual funds as they thought their investment will grow slowly but steadily. The tax saving schemes of the funds, though not paying much dividend, lured many investors to escape the long-hands of Income Tax officials.

However, it is business as usual for the funds. Reacting sharply to the panic-of-sort situation created, the Birla Mutual Fund, which manages around Rs 4,000 crore asserts, called a press meet to make it clear that there is nothing much to worry about the markets erratic movement and assured that its only a matter of time that their investments see its value.

"With our long-term investment philosophy, our view is different. We believe that Indian technology stocks are fundamentally very solid and with well-defined revenue models, strong sustainability and high growth prospects, not to mention that many of them are indeed world class companies," chief investment officer, Birla Mutual Fund, Bharat Shah said

Further ruling out any diversification of their portfolio Shah said "It’s even more risky to diversify from one sector and invest in three or four sectors". In continuation with the fund’s policy of keeping their records transparent, Jeremy Beswick, president and CEO of Birla Sun Life AMC informed that the fund saw an outflow of Rs 49.6 crore from its equity fund during April 1-20, during when the market was most volatile and the bell-weather Sensex was crashing like nine pins.

Birla Advantage Fund received a net subscription of over Rs 147 crore in March, in spite the month being considered as the lean period.

To add to the misery, there were also this rumours doing its round in the market that the over Rs 1 lakh crore mutual fund sector is facing heavy redemption pressure from investors and most of the funds are unloading their scrips to meet the unexpected pay-out. Almost like a coincidence, the mutual funds also stopped announcing the NAVs of their IT-specific schemes thus making the investors sense something fishy. Later, it was clarified by the mutual funds that the schemes were undergoing bookclosure and hence the NAVs were not announced.