Mutual funds offload entire holding in FT counter

Several schemes of large fund houses - Reliance, Birla and SBI AMCs had exposure to counter

India’s equity fund managers rushed to book losses and exit the counter of the Jignesh Shah-promoted Financial Technologies (FT) after the payment crisis at National Spot Exchange Ltd (NSEL) triggered a sharp fall in the FT stock.

FT is one of the main promoters of NSEL.

On August 1, the FT stock fell a whopping 65 per cent, the worst single-day fall. This made fund managers jittery about their investments in the company. Till July, several schemes of India’s large fund houses had exposure to FT. These included those of Reliance Mutual Fund, Birla Sun Life MF and State Bank of India Mutual Fund.

“The crack was so severe that no one could get the time to take a decisive call on the counter. We were completely taken off-guard,” said the chief investment officer of a fund house, on condition of anonymity.

He added those who exited on the first trading session in August might have been able to restrict losses to an extent. “But those who failed to take a decisive call on that particular day would have no choices but to book heavy losses later, when FT hit rock bottom on  exchanges.”

On the first trading session of August, FT shares collapsed by Rs 350, closing at Rs 191.75, against the immediate previous close of Rs 541.55 on July 31. The counter plunged to a 52-week low of Rs 102.05 later in August, before surging again. Schemes such as Reliance Growth and Reliance Equity from the stable of Reliance Mutual Fund had 1.8 per cent-2.6 per cent of their assets under management (AUM) in FT, about Rs 120 crore of investors’ money. Birla Sun Life Mutual Fund had exposures to FT through various schemes.

For instance, its frontline equity scheme pumped Rs 28.6 crore, or 0.9 per cent on the counter, while its special situations scheme had 1.8 per cent exposure to the counter. As of July 31, SBI Mutual Fund’s arbitrage opportunities scheme had 2.9 per cent of its assets in FT, according to Value Research.

However, as per the latest available statistics, only one scheme Goldman Sachs CNX 500 had investments in FT - a paltry 0.01% of its assets. Other schemes no longer have investments on the counter as on 31 August.

It is to be noted that by July-end shares of FT already had lost more than half of its value since it hit its 52-week high of Rs 1,123 in November last year. Such a deep decline would have hardly given anyone an indication that the real carnage, beyond imagination for many, was yet to hit the counter.

Last fortnight, however, has seen FT's shares gain almost 100% as the counter climbed over Rs 200 level within weeks of hitting a year low point. On Monday, shares of FT closed weak at Rs 184.90, down 7.2% on the BSE. It had touched an intra-day low of Rs 168.25.