There could be some liquidity crunch in system for short term: Mahindra AMC

There could be some liquidity crunch in the short term for the industry, Mahindra Asset Management Company Chief Equity Strategist Venkataraman Balasubramanian said Tuesday.

He, however, said the fund house has no exposure to Infrastructure Leasing & Financial Services (IL&FS), which has defaulted on a series of interest payments.

Overall, the mutual fund industry has a total exposure of Rs 2,500 crore to outstanding bonds issued by the stressed company and its subsidiaries, as per the industry insiders.

"We have no exposure to IL&FS and its group companies," Balasubramanian told reporters here.

When asked about the liquidity crunch in the system, Balasubramanian said, "There can be some liquidity crunch in the short-term. There won't be any problems in the longer term as (the) government and RBI are taking care of the liquidity situation".

During September, an outflow of Rs 2.3 lakh crore have been seen from mutual fund schemes. This included Rs 2.11 lakh crore withdrawal from liquid funds or money market segment which invest in cash assets such as treasury bills, certificates of deposit and commercial paper for a shorter horizon.

In addition, income schemes -- a type of debt mutual funds that deliver a steady income -- have seen a pullout of Rs 32,504 crore.

"It (the money) will come, definitely it will come. In the september quarter there are usually a lot of outflows. How much money comes back is the key number," he added.

However, Kaustubh Belapurkar, Director - Manager Research at Morningstar said, "Outflow from income funds can be partially attributed to negative sentiments due to the IL&FS episode".

Last month, IL&FS Group defaulted on inter-corporate deposits and commercial papers.

On September 4, it came to light that IL&FS had defaulted on a short-term loan of Rs 1,000 crore from Sidbi, while a subsidiary has also defaulted on Rs 500 crore dues to the development financial institution, which reportedly forced Sidbi to ask its chief general manager in charge of the risk management department to resign.

IL&FS is sitting on a debt pile of around Rs 91,000 crore and had been downgraded to junk status by rating agencies following the default. Of this, Rs 57,000 crore are bank loans alone, most of which are from state-run lenders.