Impact of corona virus on mutual

fund
Made by sadanand ibitwar
 introduction

 A mutual fund offers investors the opportunity to pool their money with other investors in an investment
that’s managed by professional investment managers. Mutual funds invest in stocks, bonds or other securities
according to each fund’s objective.
Four advantage of investing in mutual fund

 Professional management
 Diversification
 Affordability
 Liquidity
 Types of mutual fund

 Equity fund - the mutual fund manager invest in equity fund.there are various sub-categories such as large –
cap,mid-cap,small-cap etc.the mutual fund manager invest as per the company future growth
prospects,valuation such a pe ratio,pb ratio etc.
 Fixed income fund - the mutual fund manager invest in various type of fixed income securities such as
corporate debt,g-sec securities etc.the fund manager invested as per credit rating agencies such AA to AAA
etc as well as risk factor.
 Index fund
 Balaned fund - Balanced funds invest in a hybrid of asset classes, whether stocks, bonds, money market
instruments, or alternative investments. The objective is to reduce the risk of exposure across asset
classes.This kind of fund is also known as an asset allocation fund.
 Money market fund –investment in treasury bill,commercial bill etc
Knows about the NAV

 NAV ( net asset values ) is value/price per unit same as equity market
 Investor can buy or sell as per the NAV price
 Nav = assets – liabilities / total no of units ( same as share )
 In NAV formula,asset is the market value of the mutual fund investment as well as accrued income
 In NAV formula,the liabilities is the administrative exp,management exp,office exp,fund manager salary etc.
 The no of unit same as the share units.for example,you invest rs 10000 in hdfc balanced fund.the nav was of this fund was rs 145 per units.
 Units = 10000/145 = 68.that means you get 68 units.
 The major misconception is a higher NAV means that a particular scheme is more expensive than fund with lower nav.a higher NAV fund
means you get lesser no ofunits,hence low profit but it depend on mutual fund manager performance and recent growth or trend of the fund.
 The nav is just a number and when you are short listing mutual fund scheme,you need to compare their performance ( return ) and not the
NAV.
 When you purchase or redemption -; 1) before 3.00PM –same day NAV.2) after 3.00 PM – next day NAV.
Growth in the mutual fund

 Asset under management refer to the total market value of the investments that a person or entity manages on behalf of clients.this diagram
show that the increasing trend .the good growth in asset under management.
Franklin templeton crisis

 Introduction about crisis

 Due to covid 19 and recessionary situation,the faith of investor on these scheme delined as well as this
investor also A credit rating also very risky and returns also more .they will think that due to lockdown all
the corporate have lot of liqidity cruch and they will default in future that is why they started redemption of
their scheme
 The franklin templeton company have the various option such as - 1)redemption suspension 2) delayed
payment 3)loan against securities 4)distress of sale of asset 5) wind up the scheme
 Option for existing investor redemption upon a) maturity of bond b) distress sale asset.the compant take the
pole with unit holder and after take decision
 Franklin templeton company wind up this debt scheme.the investor money are safe.
Recessionary impact on debt mutual fund
scheme
Recessionary impact on debt mutual fund
scheme

 To understand how the recession affects debt mutual funds, it will be better to get an overview of its effect on
bonds. A recessionary environment can affect the bond market differently than it does the stock market, thanks to
the unique relationship between bonds and interest rate movements. Bonds are a fixed-rate instrument. In a
recession which is generally a slow growth phase, the monetary authority tends to reduce short-term interest rates
or repo to boost spending and encourage people to borrow. Given that bond rates are fixed, this tends to boost the
prices of bonds. Because bonds trade as stocks do, the price is updated to reflect current conditions. However, one
needs to note that- As with equity funds, even debt funds will vary greatly in quality. There are various categories
and sub-categories of debt funds. All of them need not react to the same situation in similar ways. To understand
how debt funds react during a recession, it is pertinent to understand some of the risks that fixed income securities
face .
 During economic slowdown, the ability of companies to honour their debt commitments becomes tougher, and
AAA rated companies may even be downgraded. Any downgrading of credit rating leads to erosion in value of
the bonds of such entities.
Recessionary impact on debt mutual fund
scheme

 The interest risk that comes from an increase or decrease in interest rates. If interest rates rise (above
expectations) after your purchase of the fixed income securities, the price of your securities or fund will fall
and you will lose money, when compared with not having made the investment. If you sell early, this loss
will be obvious. If you hold to maturity, then the loss is relative to what you would have gotten in other
assets. This risk is mitigated by buying shorter-term debt.
 Inflations is the risk that the bond issuer might default on coupons and/or principal repayments. This is very
likely during a recessionary phase as liquidity tightens and borrowers are unable to service their debt
payments. The way to minimize this risk is by investing in high-quality companies and avoid credit-risk
schemes.
Covid 19 impact on mutual fund

 Due to covid 19,the Indian stock market are very down.this result in the nav of the equity scheme also
declined as well as investor portfolio also showing negative returns but lot of finance proessional person give
advise to existing investor should have to hold this scheme do not redeem.the new investor also fresh
investing increases in mutual funds that is good for the mutual fund company.the investor also faith on this
scheme because after 2 years market again surgedChart
andTitle
corrected.the following data show the good flow in
equity scheme15000
as follow -;
10000

5000

0
Nov-19 Dec-19 Jan-20 Feb-20 Mar-20

Column3
Covid 19 impact on mutual fund

Credit risk funds investment is lower rating securities are gaining popularity among investor because there is a potential for double digit yield for investor.in credit risk
funds,there are lots of investor redeem their scheme and take out the money from the credit risk funds as well as IL&FS fraud exposed in global market that fears also
encourage the investor to redemption of the scheme in loss making portfolio.this outflow of the money from the market is show the fear the investor that is further
default.lockdown all over the world and business closeness lead to recessionary situation.following are the data of outflow of credit risk fund as follow -;

Chart Title
0
Nov-19 Dec-19 Jan-20 Feb-20 Mar-20
-1000 -637
-2000 -1191 -1215
-1899
-3000
-4000
-5000
-6000 -5568
Covid 19 impact on mutual fund

 Some liquid fund showing the negative cash balanced.the negative cash balance in mutual fund scheme a sign of borrowing.mutual fund
manager borrow upto 20 % of the net asset of the scheme .govt also announced 50000 crore special liqidity package for mutual fund as well as
asset management company.
 From the Duration debt fund as well as other debt scheme the investor are outflow/take out the money. Due to covid 19 crisis and recessionary
situation all over the words.
 Corporate and government bond may see stress due to liquidity cruch
 If default occurs,the bond values also fall.fall in bond value will result in lower nav for debt fund.
 Liquidity has very low across most corporate paper including AAA and corporate revenue also declined that come to problem of liquidity.

 More seller and limited buyer for corporate bond and CP currently that result in decreasing the NAV
 There exists a possibility that several corporate may face liquidity cruch due to the covid 19 that effect of outflow or redemption are increased
by investoe
 Most of the debt and mutual scheme are winded up by many mutual scheme company.
Conclusion as per my analysis and research

 It is the best time to investment in mutual fund and tock market.lots of company share declined by 50 to 70
%.this give good return after 3 to 5 years.investor go for long term investment not thinking for short term
investment.this worst situation come in after 15 to 20 years while but 5 % people take advantage and invest
after they earn good return.this is the good time to opportunity for the investment.before investment you
have to check the the asset allocation,who managed the firm ?,what is the past performance etc.and doing
some research also. As per my research ,following are the best mutual fund scheme for investment such as -;
1) in large cap,axis blue chip fund,canara rebeco blue chip fund ,dsp top 100 equity fund 2)in mid cap,kotak
emerging equity fund 3)In small cap,sbi small ap fund.