Investing in capital markets has become a challenge for most investors in the wake of the novel coronavirus outbreak. The pandemic’s economic impact has left existing mutual fund investors in the country spooked as well. The recent closure of six debt mutual funds by global giant Franklin Templeton is a stark example of how Covid-19 has worsened India’s credit situation, with liquidity becoming a major issue at Non-banking financial companies (NBFC), who offer many mutual fund schemes.
Panicked investors are now believed to be pulling out their investments from mutual funds due to widespread negativity in markets around the globe, including India. The widespread fear in the market, which also includes aversion from investing in mutual funds and other capital investments, has left the MF segment in deep shock.
The Association of Mutual Funds of india (AMFI) assured investors that it was a one-off incident and that it will have no contagion effect on other credit-risk funds. RBI’s instant action is an assurance that the central bank is monitoring the situation proactively and it would introduce further measures to give mutual funds adequate liquidity support. Many experts had already recommended bank OF INDIA' target='_blank' title='rbi-Latest Updates, Photos, Videos are a click away, CLICK NOW'>rbi to offer additional liquidity support to the mutual fund houses, who are facing major liquidity challenges amid the Covid-19 pandemic.