These 71 mutual funds were hit by bond rating downgrades in Sep 2019

In Sep 2019, 71 mutual funds across 12 categories were hit by bond rating downgrades. At the same time, 12 mutual funds across 4 categories saw rating upgrades. This is a list of both.

Published: October 29, 2019 at 11:07 am

Last Updated on April 24, 2022 at 8:15 pm

In Sep 2019, 71 mutual funds across 12 categories were hit by bond rating downgrades. At the same time, 12 mutual funds across 4 categories saw rating upgrades. This is a list of both. A bond rating downgrade implies the repaying ability of the bond issuer has weakened in the estimation of rating agencies.

When a downgrade occurs, the value of the bond in the market falls and hence the NAV of the debt mutual fund will also fall in a proportional manner as per its weight in the portfolio. Rating downgrades are a common event in the bond market and investors should be aware of these and not get scared.

The problem arises when the fund manager refuses to sell the downgraded bond (when it is severe enough) or renews the contract with the bond issuer. Often the fund manager may not be able to sell the bond and its weight in the portfolio keeps increasing.

Thus debt mutual fund investors should be aware of credit rating change and associated changes in portfolio weight. Repeated rating downgrades and defaults have spooked debt mutual fund investors. This is a clear sign of an economic slowdown.

While a huge vertical drop in the NAV is a huge shock, there is no need to run scared of debt funds. They remain a much better alternative to risky FDs from small finance banks or co-operative banks. Read moreSmall Finance Bank Deposits: Are they safe? Can I invest? Plus other FAQ and PMC Bank Fraud: Lessons from Sanjay Gulati’s story

With some knowledge of risks and occasional monitoring, debt mutual funds are excellent choices especially for medium and long term investment.  Arbitrage funds also carry significant credit risk and the same precautions should apply to these. Read more Free E-book: A Beginner’s Guide To Investing in Debt Mutual Funds and Understanding Credit Rating Risk in Debt Mutual Funds.

Bond Upgrades in Sep 2019

This is the CRISIL Ratings Scale. Use it to understand rating changes. This is a useful FAQ.

A+ to AA-

Bond issuer: Asirvad Microfinance Pvt Ltd.

Funds holding these bonds

Axis Credit Risk Fund-RegCredit Risk Fund
Nippon India Credit Risk FundCredit Risk Fund
Axis Credit Risk Fund-RegCredit Risk Fund
Mahindra Credit Risk Yojana-RegCredit Risk Fund
Axis Strategic Bond FundMedium Duration
Axis Ultra Short Term Fund-RegUltra Short Term Fund
Aditya Birla SL Credit Risk Fund-RegCredit Risk Fund
Nippon India Credit Risk FundCredit Risk Fund

AA- to AA

Bond Issuer: Manappuram Finance Ltd.

Funds holding these bonds

ICICI Pru Balanced Advantage FundBalanced Advantage
ICICI Pru Credit Risk FundCredit Risk Fund
ICICI Pru Medium Term Bond FundMedium Duration

 

AA-(SO) to AA

Kogta Financial (India) Ltd. bonds held by Sundaram Short Term Credit Risk Fund. SO here stands for a structured obligation.

Bond downgrades in Sep 2019

Indiabulls housing finance bonds dropped from AAA to AA+. Considering its nature of business and present climate, funds holding these should be monitored closely, especially if the bond weight increases.

As many as 46 funds are affected by this, although marginally.

Baroda Treasury Adv Fund(G)Low Duration
Edelweiss Corporate Bond Fund-Reg(G)Corporate Bond
Invesco India Ultra Short Term Fund(G)Ultra Short Term Fund
BNP Paribas Corp Bond Fund(G)Corporate Bond
L&T Credit Risk Fund(G)Credit Risk Fund
Indiabulls Short Term Fund(G)Short Duration
Nippon India Credit Risk Fund(G)Credit Risk Fund
HDFC Floating Rate Debt Fund(G)Floating Rate
Nippon India Strategic Debt Fund(G)Medium Duration
Nippon India Short Term Fund(G)Short Duration
Nippon India Credit Risk Fund(G)Credit Risk Fund
Nippon India Credit Risk Fund(G)Credit Risk Fund
Nippon India Strategic Debt Fund(G)Medium Duration
Aditya Birla SL Regular Savings Fund(G)Conservative Hybrid Fund
Principal Short Term Debt Fund(G)Short Duration
Aditya Birla SL Short Term Opp Fund(G)Short Duration
Nippon India Strategic Debt Fund(G)Medium Duration
Nippon India Credit Risk Fund(G)Credit Risk Fund
UTI Regular Savings Fund-Reg(G)Conservative Hybrid Fund
Nippon India Strategic Debt Fund(G)Medium Duration
Aditya Birla SL Medium Term Plan(G)Medium Duration
Aditya Birla SL Equity Hybrid ’95 Fund(G)Aggressive Hybrid Fund
IDFC Hybrid Equity Fund-Reg(G)Aggressive Hybrid Fund
HDFC Credit Risk Debt Fund-(G)Credit Risk Fund
Canara Rob Savings Fund-Reg(G)Low Duration
Mirae Asset Savings Fund-Reg Savings Plan(G)Low Duration
Axis Credit Risk Fund-Reg(G)Credit Risk Fund
Aditya Birla SL Dynamic Bond Fund-Reg(G)Dynamic Bond
Nippon India Hybrid Bond Fund(G)Conservative Hybrid Fund
Axis Strategic Bond Fund(G)Medium Duration
Aditya Birla SL Equity Hybrid ’95 Fund(G)Aggressive Hybrid Fund
HDFC Corp Bond Fund(G)Corporate Bond
SBI Equity Hybrid Fund-Reg(D)Aggressive Hybrid Fund
L&T Equity Savings Fund-Reg(G)Equity Savings
Nippon India Floating Rate Fund(G)Floating Rate
HDFC Credit Risk Debt Fund-(G)Credit Risk Fund
Aditya Birla SL Low Duration Fund(G)Low Duration
HDFC Corp Bond Fund(G)Corporate Bond
Baroda Credit Risk Fund-A(G)Credit Risk Fund
Nippon India Floating Rate Fund(G)Floating Rate
HDFC Corp Bond Fund(G)Corporate Bond
Aditya Birla SL Equity Hybrid ’95 Fund(G)Aggressive Hybrid Fund
UTI ULIP(G)Dynamic Asset Allocation
UTI Regular Savings Fund-Reg(G)Conservative Hybrid Fund
UTI Hybrid Equity Fund-Reg(G)Aggressive Hybrid Fund
Nippon India Prime Debt Fund(G)Corporate Bond

Reliance Broadcast Network Ltd. bonds dropped from BBB to C and D (default) in one case.

BBB to C: Funds affected

Franklin India ST Income Plan(G)Short Duration
L&T Credit Risk Fund(G)Credit Risk Fund
L&T Low Duration Fund-Reg(G)Low Duration
L&T Credit Risk Fund(G)Credit Risk Fund
Franklin India Corp Debt Fund-A(G)Corporate Bond

BBB to D fund affected L&T Credit Risk Fund(G) but the fund has managed to reduce exposure from almost 2% in Aug 2019 to 0.6% in Sep 2019.

Reliance Home Finance Ltd. C to D 

These are the fund affected but have 1% or less exposure.

Nippon India Strategic Debt Fund(G)Medium Duration
Nippon India Credit Risk Fund(G)Credit Risk Fund
SBI Credit Risk Fund-Reg(G)Credit Risk Fund
SBI Debt Hybrid Fund-Reg(G)Conservative Hybrid Fund
SBI Debt Hybrid Fund-Reg(G)Conservative Hybrid Fund
Nippon India Strategic Debt Fund(G)Medium Duration
SBI Credit Risk Fund-Reg(G)Credit Risk Fund
SBI Equity Hybrid Fund-Reg(D)Aggressive Hybrid Fund
Nippon India Equity Hybrid Fund(G)Aggressive Hybrid Fund
Nippon India Hybrid Bond Fund(G)Conservative Hybrid Fund
Nippon India Equity Savings Fund(G)Equity Savings

Morgan Credits Pvt Ltd. A- to BBB- Would recommend investors exit from Nippon India Ultra Short Duration Fund since it has a high exposure – within brackets.

Nippon India Ultra Short Duration Fund (5.9%)Ultra Short Term Fund
Nippon India Equity Hybrid Fund(3.4%)Aggressive Hybrid Fund
Nippon India Equity Savings Fund(1.5%)Equity Savings
Nippon India Credit Risk Fund(0.5%)Credit Risk Fund

Yes Capital (India) Pvt Ltd. AA to A

Franklin India Low Duration Fund(MD)Low Duration
Franklin India Ultra Short Bond Fund-Super Inst(G)Ultra Short Term Fund

Zee Learn Ltd. AA+(SO) to AA

UTI Credit Risk Fund-Reg(G)Credit Risk Fund
UTI Medium Term Fund-Reg(G)Medium Duration

So far, the increase in exposure accompanying the bond downgrades has only been marginal. However, investors in these funds should keep an eye for news about these bonds and the weight in the portfolio.

Do share this article with your friends using the buttons below.

🔥Enjoy massive discounts on our courses, robo-advisory tool and exclusive investor circle! 🔥& join our community of 7000+ users!
Use our Robo-advisory Tool for a start-to-finish financial plan! More than 2,500 investors and advisors use this!
Track your mutual funds and stock investments with this Google Sheet!
We also publish monthly equity mutual funds, debt and hybrid mutual funds, index funds and ETF screeners and momentum, low-volatility stock screeners.
Follow Freefincal on Google News
Follow Freefincal on Google News
Subscribe to the freefincal Youtube Channel. Subscribe button courtesy: Vecteezy.
Subscribe to the freefincal Youtube Channel.
Follow freefincal on WhatsApp Channel
Follow freefincal on WhatsApp
Podcast: Let's Get RICH With PATTU! Every single Indian CAN grow their wealth! 
Listen to the Lets Get Rich with Pattu Podcast
Listen to the Let's Get Rich with Pattu Podcast
You can watch podcast episodes on the OfSpin Media Friends YouTube Channel.
Lets Get RICH With PATTU podcast on YouTube
Let's Get RICH With PATTU podcast on YouTube.
🔥Now Watch Let's Get Rich With Pattu தமிழில் (in Tamil)! 🔥
  • Do you have a comment about the above article? Reach out to us on Twitter: @freefincal or @pattufreefincal
  • Have a question? Subscribe to our newsletter using the form below.
  • Hit 'reply' to any email from us! We do not offer personalized investment advice. We can write a detailed article without mentioning your name if you have a generic question.

Join 32,000+ readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email! (Link takes you to our email sign-up form)


About The Author

Pattabiraman editor freefincalDr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over ten years of experience publishing news analysis, research and financial product development. Connect with him via Twitter(X), Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free investment advice.
Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! More than 3,000 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter the market condition is!! Watch the first lecture for free!  One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
Our new course!  Increase your income by getting people to pay for your skills! More than 700 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos!   
Our new book for kids: “Chinchu Gets a Superpower!” is now available!
Both boy and girl version covers of Chinchu gets a superpower
Both the boy and girl-version covers of "Chinchu Gets a superpower".
Most investor problems can be traced to a lack of informed decision-making. We made bad decisions and money mistakes when we started earning and spent years undoing these mistakes. Why should our children go through the same pain? What is this book about? As parents, what would it be if we had to groom one ability in our children that is key not only to money management and investing but to any aspect of life? My answer: Sound Decision Making. So, in this book, we meet Chinchu, who is about to turn 10. What he wants for his birthday and how his parents plan for it, as well as teaching him several key ideas of decision-making and money management, is the narrative. What readers say!
Feedback from a young reader after reading Chinchu gets a Superpower (small version)
Feedback from a young reader after reading Chinchu gets a Superpower!
Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. - Arun.
Buy the book: Chinchu gets a superpower for your child!
How to profit from content writing: Our new ebook is for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
Do you want to check if the market is overvalued or undervalued? Use our market valuation tool (it will work with any index!), or get the Tactical Buy/Sell timing tool!
We publish monthly mutual fund screeners and momentum, low-volatility stock screeners.
About freefincal & its content policy. Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on mutual funds, stocks, investing, retirement and personal finance developments. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified with credible and knowledgeable sources before publication. Freefincal does not publish paid articles, promotions, PR, satire or opinions without data. All opinions will be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
Our publications

You Can Be Rich Too with Goal-Based Investing

You can be rich too with goal based investingPublished by CNBC TV18, this book is meant to help you ask the right questions and seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now.
Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want Gamechanger: Forget Start-ups, Join Corporate and Still Live the Rich Life you wantThis book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.

Your Ultimate Guide to Travel

Travel-Training-Kit-Cover-new This is an in-depth dive into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, and how travelling slowly is better financially and psychologically, with links to the web pages and hand-holding at every step. Get the pdf for Rs 300 (instant download)