FT India Fiasco An Exception Than A Rule

The Indian mutual fund industry, and especially the debt mutual fund segment, was rattled after Franklin Templeton India, one of the oldest and biggest fund houses in India, announced the winding up of six of its debt funds. This resulted in freezing up of Rs 31,000 crore of investor money and panic among them. However, it also taught a big lesson to investors. First, debt funds should not be considered as an extension of their bank fixed deposit. In addition to this, nothing can replace thorough checking of the debt portfolio before investing in one. Besides, it also requires constant monitoring.

This becomes more imperative if the fund is generating exceptional returns. For example, one of the low duration funds closed by Franklin Templeton India was having yield to maturity of 11.6 per cent just a few months back and was holding papers of Essel Infra, Greenko Clean Energy and Dolvi Minerals. We believe that the risk of redemption has ebbed now especially after the RBI announced liquidity support to mutual funds to the tune of Rs 50,000 crore. The FT fiasco will be an exception than a rule. In this issue, one of our special report details how the shape of the debt mutual fund industry has changed since the ILFS default and now the industry is on a solid footing.

In another special report, we have tried to break the old mould of ‘SIP Karo Aur Bhul Jao’. As we have seen, most of the equity-dedicated mutual funds have been yielding negative results in a timeframe of three and five years. Our report shows how one can use broader market valuation ratios to time a proper entry and exit from the fund and optimise the returns. Our cover story dives deep to understand if investing in frontline index fund makes sense at this point of time. Hope the articles will help you make a profitable investment decision. 

SHASHIKANT