A lot of investors have been surprised that the NAV of a debt fund is falling so sharply. But that is because of the investments in companies that are under deep stress where the fund has no choice but to write off its holdings in such bonds. Earlier this month the NAV had suddenly fallen by 15% and now the NAV has fallen by another 26%. That is because, the fund has written off its entire holdings in Sintex BAPL, a subsidiary of Sintex Plastics, which had defaulted on its repayment of bonds worth Rs.90 crore. Out of its entire bond holdings, Sintex BAPL accounted for nearly 26% of its total AUM and that entire amount has been wiped out. Of course, if the fund recovers anything from the company then it will be written back but that is not clear at this point of time.

This fund has a history of taking on huge credit risks on its books. For example, earlier the company had also written off Rs.105 crore of its exposure to IL&FS and that had earlier resulted in 6% erosion in NAV. Over the last one year, the fund has seen its NAV reduce by 47% and remains among the worst performing debt funds.