A recent report published by Prime database suggests that rating may not be a big concern when it comes to mutual funds. Of the total investments in commercial papers or CPs, the MF industry has exposure of 97.08% to A1+ securities as on June 2019. This is an increase from the month before (95.25% in May 2019).
If we look at corporate bonds, the MF industry has over 72% exposure to such bonds with credit ratings of AAA and AA+.
The investments in A+ and below rated assets were limited to 11% of the corporate bond exposure, shows the data.
Commercial paper-rating distribution summary
|
30 June 2019 |
31 May 2019 |
|||
|
Rating |
Value (Rs. crore) |
As % of total |
Value (Rs. crore) |
As % of total |
|
A1+ |
3,61,534.81 |
97.08 |
4,10,669.82 |
95.25 |
|
A1 |
148.70 |
0.04 |
163.25 |
0.04 |
|
NOT RATED/NOT KNOWN/ OTHERS |
10,738.72 |
2.88 |
20,326.77 |
4.71 |
Source: Prime database
Corporate bonds-rating distribution summary
|
30 June 2019 |
31 May 2019 |
|||
|
Rating |
Value (Rs. crore) |
As % of total |
Value (Rs. crore) |
As % of total |
|
AAA |
3,50,590.17 |
60.43 |
3,66,493.06 |
60.62 |
|
AA+ |
64,659.41 |
11.14 |
67,582.57 |
11.18 |
|
AA |
79,031.17 |
13.62 |
81,421.08 |
13.47 |
|
AA- |
39,960.89 |
6.89 |
41,934.89 |
6.94 |
|
A+ |
29,266.21 |
5.04 |
29,289.51 |
4.84 |
|
A |
11,714.39 |
2.02 |
12,199.64 |
2.02 |
|
A- |
5,363.44 |
0.92 |
5,608.41 |
0.93 |
|
BBB+ |
1,576.15 |
0.27 |
1,649.19 |
0.27 |
|
BBB |
160.65 |
0.03 |
164.60 |
0.03 |
|
BBB- |
194.63 |
0.03 |
231.16 |
0.04 |
|
NOT RATED/NOT KNOWN/ OTHERS |
14,345.82 |
2.47 |
14,806.66 |
2.45 |
Source: Prime database
Note: If the same instrument has been rated differently by different rating agencies, its reflection would be under both such ratings. The analysis is based on Monthly Portfolio Statements of 43 Mutual Funds disclosed till 11th July 2019 on their websites.
In absolute terms, the industry’s has a limited exposure to CPs. Holding of mutual funds in CPs stood at Rs.3.72 lakh crore on June 30, 2019, down by 13.69% from Rs.4.31 lakh crore as on May 31, 2019. In August 2018, the industry had exposure of close to Rs.5 lakh crore or 24% of the total debt investments.
Pranav Haldea, MD, Prime Database Group said that mutual funds have significantly reduced their exposure to CPs, after the IL&FS crisis last year. He said that the industry has also reduced its corporate bond exposure substantially. Holding of mutual funds in corporate bonds in value terms stood at Rs.5.80 lakh crores on June 30, 2019, down by 4.13 % from Rs.6.04 lakh crore as on May 31 2019. The highest ever holding of mutual funds in corporate bonds was in September 2017 at Rs.6.61 lakh crore.
