Debt mutual funds' NAVs plunge 50% in 1 day on DHFL's payment default, says report

The net asset values (NAVs) of various debt mutual funds, including those of top fund houses crashed on Tuesday after private mortgage lender Dewan Housing Finance Corp Ltd (DHFL) defaulted on bond payments, The Times of India reported.

All the mutual funds that have bonds issued by DHFL in their portfolio, such as DHFL Pramerica MF and Tata MF, saw their NAVs plunge by 50 and 30 percent respectively, data showed, adding that other debt funds such as Reliance, Birla, UTI and DSP MFs also reported a significant drop in their NAVs, as per the report.

Crisil and ICRA on Tuesday downgraded the rating of DHFL's Rs 850 crore commercial paper to “D” from "A4+" and "A4", respectively. A press release by Crisil stated that "the downgrading reflects delays in debt servicing by DHFL on some of its non-convertible debentures (NCDs) - not rated by CRISIL - because of inadequate liquidity."