Mutual fund investors in a fix over Budget day trading

Suresh P Iyengar Mumbai | Updated on January 30, 2020

Investor redeeming units on Monday will get the benefit of Budget day’s market movement

Mutual fund investors will be caught in a peculiar situation on the Budget day when their investments will be able to capture the price movement in stock markets but will not be allowed to cash-in.

Though officially Saturday is declared as holiday, fund managers will be working as an exception, with the stock markets opened for special session on the announcement of Union Budget.

However, investors in equity and exchange traded funds can trade as usual on Saturday without any restrictions.

“It will be like Muhurat trading. Fund managers will be placing orders, net asset value will be calculated but it will not be disclosed and investors will not be allowed to sell their units due to many operational challenges,” said the CEO of a mutual fund house.

In their scheme information documents all the mutual funds have declared Saturday and Sunday as ‘non-business day’. To amend this, mutual funds have to issue notices to investors and publish statutory advertisements in leading newspapers which is a lengthy process considering that it will be used on this occasion only.

Even if notices are sent, very few investors look into it and decide to trade on their mutual fund units, he said.

Nil software support

Moreover, registrar and transfer agents such as CAMS (Computer Age Management Services) and Karvy have already developed their software with the assumption that there will be no trading on weekends. If investors allowed to redeem or invest on Saturday based on the NAV announced, RTAs have to make changes in their software that will entail huge investments. This may not be worth for a very temporary situation like this, he said.

Mutual funds will calculate the NAV on Saturday only for the record purpose. On Monday, if an investors place redemption before 3 pm, they will get the same day NAV and after 3 pm the next business day NAV will be taken into account.

Investor redeeming units on Monday will get the benefit of Saturday’s market movement and there will be no loss.

Published on January 30, 2020

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