InvestorQ : Is it true that the Reliance stock rally has posed problems for Indian mutual funds?
vidhya Laxmi made post

Is it true that the Reliance stock rally has posed problems for Indian mutual funds?

Answer
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sarah Leo answered.
2 weeks ago


The frenetic rally in Reliance industries has created a unique problem for India’s equity mutual funds. RIL’s weight in the Sensex is up from 11% to 17.4% but most MFs have hit the 10% ceiling that they are allowed to invest in RIL and hence cannot buy more.

This has led to most funds underperforming the index as Kurtosis was working against them. Funds have no option but to book profits out of RIL as they cannot cross the 10% mark, even if it is caused by appreciation in stock price over time.

This gets underlined as equity funds have seen outflows for the second month in a row in Aug-20 due to listless performance. Money managers had to trim their holdings in RIL by nearly 5 million shares as they were very close to the ceiling and had to sell, impacting returns.