Welspun Share Price Shock – Rs 216 Crores Impact – Mutual fund schemes impacted with this
In the last 10 days, Welspun India shares have crashed by almost 50%. Stock market investors could not absorb this shock. Several Mutual Fund schemes investing in this stock even have to absorb this shock. Mutual fund schemes have invested over Rs 216 Crores as of the end of July, 2016. Why Welspun India Shares have crashed? How much value is lost by mutual fund investors? Which mutual fund schemes have impacted with this stock price crash? How mutual fund investors can avoid such shocks in future?
About Welspun India Stock crash
Welspun India is a textile company based in Mumbai. It is Asia's largest and the 2nd largest Terry Towel producer in the world. It exports more than 94 per cent of its towels to more than 34 countries.
During the second week of Aug, 2016, Welspun India was trading at Rs 100 per share. This stock has crashed by more than 50% in last few trading sessions and currently trading at Rs 49.50 per share. US Retailer, Target Corp said it terminated business with Welspun claiming that the company is passing of low quality cotton sheets indicating it as premium Egyptian Cotton. Walmart Stores started probing into this scam. This made investors to come out of this stock and price crashed from Rs 100 to Rs 49 in last few trading sessions.
What does Welspun India say about this?
Welspun India said its subsidiary WGBL has been supplying product as per specifications for one of its leading clients. The company said, immediate action initiated to investigate on the scam. It has appointed one of the big four auditors to check systems and processes to avoid this in future.
How much investments done by Mutual funds schemes in Welspun India stock?
Mutual funds have been betting on Welspun India and invested over Rs 216 Crores in this stock as of the end of July, 2016. There are 22 Mutual Fund schemes that have invested in this stock. Now this value is reduced to below Rs 113 Crores (50% fall).
Which mutual fund schemes got affected with this stock price crash?
- There are total of 22 mutual fund schemes that have invested in Welspun India stock. The majority of them are mid-cap mutual fund schemes that has largest exposure to this stock.
- Reliance Growth Fund has invested 97 Lakhs shares, i.e. over Rs 100 Crores which is 1.8% of their portfolio. Means, if they have not sold as of now, it would have impact of almost 1% of the portfolio with just one stock price crash.
- ICICI Pru Mid-cap fund has invested in 28 Lakh shares – Rs 28 Crores
- Others funds are HSBC India ops fund – 14 Lakh shares, BNPP Mid-cap fund – 12.15 Lakh shares, L&T India value fund – 10 Lakh shares.
Which mutual fund scheme has the highest exposure in terms of %age?
HSBC Mid-cap mutual fund scheme has the highest exposure of 4.3%. Means straight away it has lost 2.15% of its portfolio with this single stock crash.
Which Mutual Fund AMC has invested more?
Apart from Reliance Growth fund, which has higher exposure, below mutual fund AMC’s have highest exposure to this stock.
- HSBC MF AMC has invested 44 Lakh shares collectively from 7 mutual fund schemes in this stock.
- 4 mutual fund schemes from Edelweiss has invested in this stock. They are Edelweiss Absolute Return Fund, Edelweiss Diversified Growth Equity Top 100 Fund, Edelweiss Prudent Advantage Fund and Edelweiss ELSS Fund.
List of Mutual fund schemes that have invested in this stock are here:
What should a mutual fund investor do to avoid such shocks in future?
Investments in mutual funds are done so that experts invests in stock markets on your behalf. However, earlier we have seen Jindal Steel power credit rating downgrading impacted several debt mutual funds. Some of the JPMC mutual fund schemes have put-off from selling the funds. You may continue to hear such shocks in future. However, my advice is don’t over invest in one single MF scheme. You should invest in a diversified portfolio containing large cap funds, mid-cap funds, small-cap funds and balanced funds. Even in the mid – cap segment, don’t invest in a single fund. Invest in at least 3-4 mutual funds so that such diversification would help you to reduce this risk. E.g. I keep recommending Franklin India smaller cos fund, HDFC Mid-cap fund and sometimes for BNPP mid-cap fund and ICICI mid-cap fund in mid-cap/small cap mutual fund category. If you see out of 4, there are 2 schemes, i.e. BNPP Mid-cap fund and ICICI mid-cap fund has impacted in this portfolio, others have a zero impact. Investing in diversified portfolio can help you to reduce such risks.
Disclaimer: This article is not to point any mutual fund scheme or any particular stock. All these details are available in various online portals. These facts indicated in this article is to educate investors on how they should plan mutual fund investments in case of such sudden shocks.
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Welspun Share Shock – Rs 216 Crores Impact – Which mutual fund schemes impacted with this
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