Equity MF investments: Ripple effect on PSBs due to free fall in PNB shares

The nearly 10 per cent fall in the shares of Punjab National Bank (PNB), hit by a $1.8 billion fraud, has impacted more than 100 mutual fund equity schemes. The mutual fund industry owns 232 million shares of PNB, worth Rs 40 billion, as on 31 January, 2018. Several schemes of LIC Mutual Fund have heavy allocation to India's second largest public lender, some as high as 7.5 per cent.

The free fall in PNB’s shares on Wednesday also had a ripple effect on other public sector banks. Collectively, the top 6 PSU banks have attracted more than Rs 390 billion of the Rs 9 trillion equity assets.

PNB has tumbled nearly 40 per cent against its 52-week high seen in late October, after the government announced re-capitalisation. Several public lenders had actively come under fund managers' radar after the re-capitalisation was announced. These included PNB, State Bank of India, Bank of Baroda and Canara Bank. However, all these counters have lost substantial value over the past few weeks.