The most important impact would be on investors’ hybrid portfolio. Hybrid funds are the funds having the composition of both debt and equity. While inter scheme transfers by mutual funds are done with a view to managing the liquidity issue of their debt funds, no one can really question it because it is not illegal.

Since it’s bad precedence as mutual fund houses are bailing out the worst-hit funds at the cost of investors but you cannot do much about this. For a hybrid portfolio, SEBI has not established any definition or fixed composition of debt or equity, this means fund managers are free to change the composition according to them. However, you should also see the quality of the paper they are transferring the funds to.

Another impact on investors could be the inclusion of poor quality debt funds in their portfolio which will turn out to be a huge loss if the markets didn’t respond well. It would be very difficult for the investor to get the right price for their investment. This would mean the loss of initial capital for the investor. Since the action done by fund houses is legal, you can neither be held mutual fund houses accountable nor raise any questions against their actions.