The Hindu Business Line : FT Capital Protection Fund movement puzzles marketmen

Mumbai, Feb. 20 Units of Franklin Templeton’s Capital Protection 3 Year dividend scheme shed close to 10 per cent in value at the NSE on Wednesday, with the unit closing at Rs 51.60. The unit has been steadily shedding value ever since it touched a peak of Rs 248.90 on January 29.

But market players are mystified at the current price as it is still way above its intrinsic worth, with Franklin Templeton reporting a net asset value (NAV) of only Rs 11 approximately. “The underlying price cannot depict such high premium to the NAV. So there is definitely something amiss here,” said Mr Juzer Gabajiwala, who is engaged in mutual fund distribution for Ventura Securities Ltd.

‘Manipulation by some’

A fund manager with one of the top fund houses in the country went a step further. “While within limits prices are a function of demand and supply forces but in this case it seems that there is manipulation by some people in the market”.

The capital protection scheme from Franklin Templeton had earlier appreciated by around 18 times in January from a trading price of Rs 13.70 prevailing on January 4.

“Whilst we are unable to explain the sharp rise in the traded prices, we believe that there is no fundamental reason for the listed price to quote at such high multiples to the underlying NAV,” said Mr Vivek Kudva, President, Franklin Templeton Investments (India).

“There is no market maker for these securities and trading in the units of these funds is subject to the circuit filter rules of the exchange,” Mr Kudva added. The mutual fund has also cautioned the investors on its Web site to this effect.

“This kind of rise in prices should be investigated by the stock exchanges,” said a fund manager from a Mumbai based mutual fund house.

The scheme’s growth option too is trading at a price that is significantly higher than its underlying net asset value. The growth option scheme’s units closed on Wednesday at Rs 17.80 as against the latest available net asset value of around Rs 11.

Franklin Templeton Capital Protection scheme is a close ended scheme, which was launched in May 2007. The units issued under the scheme were listed on National Stock Exchange on June 25, 2007. On Wednesday, units of Prudential ICICI’s SPIcE hit the upper circuit limit of Rs 199.10 at the BSE. The trading in the units of this exchange traded fund was suspended from trading once in the past for erratic price movement.

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