The Hindu Business Line : MFs declare a ‘non-business day’

When biz goes ‘non’
Offer documents of MF schemes usually provides that a fund can take a call on the unusual developments in the market and declare a day as non-business day
On unusual trading days, all transactions happen based on NAVs of the subsequent trading day

Our Bureau

Mumbai, May 18 Mutual funds have decided to treat Monday as a ‘non-business day’ though the benchmark stock indices gained more than 15 per cent on the day.

The Association of Mutual Funds in India (AMFI) in consultation with its members has decided to treat today as a non-business day for equity schemes of mutual fund houses, said Mr A.P. Kurian, Chairman, AMFI.

This follows exchanges calling a halt to the trading for the day as the indices hit the upper circuit twice.

Request for purchase of units and redemption received on Monday will be processed on the basis of Net Asset Value (NAV) calculated on Tuesday, said fund managers.

On a usual trading day, any purchase or redemption requests made are calculated at the NAVs of that very same day.

On unusual trading days, all transactions happen based on NAVs of the subsequent trading day, said a fund manager.

The offer documents of mutual fund schemes usually provides that a fund can take a call on the unusual developments in the market and declare a day as non-business day, said Mr Kurian.

According to fund managers and mutual fund distributors, the number of applications received today was insignificant, and most fund houses had not accepted applications.

We don’t expect large-scale profit booking to happen tomorrow as the markets have got re-rated, so it is unlikely that there will heavy redemptions tomorrow, said Mr Sandesh Kirkire, CEO of Kotak AMC.

While market men are not expecting any redemption pressure, they are not too positive on new money coming in mutual funds at these levels either.

Retail investors are waiting for opportunities at lower levels or at levels when the market momentum is sustained, said Mr Gopal Agarwal, Head of Equity, Mirae Asset Management Co.

There is a perception amongst the investors that this is a short-lived rally and so they are waiting for lower levels to enter the markets through mutual funds, said Mr Rakesh Goyal, Head of Distribution, Bonanza Portfolio.

Domestic institutions including mutual funds were net sellers of equity worth Rs 8.41 crore in the trading today, according to the data on NSE.