For funds, a lot is riding on an Amtek sliding

The counter lost 70% of its value last month

At least five of India’s top 10 fund houses have exposure to the stressed Amtek Auto, an automobile and ancillary company. They are HDFC Mutual Fund, Kotak MF, UTI MF, ICICI Prudential AMC, and IDFC MF. Fifteen plans have allocated Rs 100 crore to the stock. The share lost 70 per cent in August, Rs 170 to Rs 51, hitting a six-year low.

HDFC Tax Saver Fund has invested the most, Rs 20.06 crore as on July 31. But, in terms of percentage of allocation, it is marginal, less than 40 basis points, given the size of the scheme, Rs 5,000 crore.

The scheme gave negative return of 6.23 per cent in the past one month compared with the category's return of 5.55 per cent in the negative territory.

A majority of the exposure to Amtek Auto is of arbitrage funds. These funds try to take the benefit of the price difference of the same asset between two or more markets or market segments. If an arbitrage fund buys the stock in the cash market, it will sell an equal quantity in the futures market to make a profit from the mispricing. Fund managers say that these funds will not be impacted by the fall in Amtek Auto stock price as this position would be fully hedged in the derivatives market.  

JM Arbitrage Advantage Fund and Kotak Equity Arbitrage Fund allocated Rs 18.5 crore each. IDFC Arbitrage Fund infused Rs 13.58 crore, according to Value Research.

Others include Religare Invesco Arbitrage Fund, L&T Arbitrage Opportunities, IDFC Arbitrage Plus, and ICICI Prudential Blended Plan A. Collectively, all arbitrage funds contributed Rs 65 crore to Amtek. UTI Spread Fund has the largest contribution in terms of allocation as a percentage of its assets — 2.61 per cent.  Kaushik Basu, manager at UTI MF, said, “Being an arbitrage fund, we do not take a directional call and, thus, the fund is not hit.”

HDFC Premier Multi-Cap Fund has allocated 1.47 per cent of its assets or Rs 5 crore. The scheme's one-month return was 7.82 in the negative territory against the category's return of minus 5.41 per cent.