Mutual funds hold Rs 2,750 crore of its equity AUM in PNB shares

Shares of Punjab National Bank, the scam-hit public sector bank, are down 5.7 per cent even today. The stock fell 9 per cent yesterday. The falling prices of the shares will directly impact the mutual fund schemes that are holding PNB shares. We tried to find out whether any equity mutual fund schemes have significant exposure to the shares of the state-owned bank.

According to PNB, some staffers have colluted with some customers and committed a large fraud worth Rs 11,400 crore. It is still not clear how it will play out in the coming days. Also, whether it would also hit other banks. However, investors have already taken a big hit. Sadly, even mutual funds and insurance companies with sizeable investments in PNB would be hit.

According to data available with Ace Mutual Fund, 73 mutual fund equity schemes hold equity share in Punjab National Bank, comprising a total market value of Rs 2,750 crore. See table below for the schemes which hold over 3 per cent of their portfolio in PNB equity shares. The portfolio data is for January, 2018.

What should mutual fund investors do?
Not many mutual fund schemes have significant investments in PNB. Only two banking ETFs have over 9 per cent of their AUM in the stock. However, ETFs don’t have much of a choice in stocks as they are mandated to buy the constituent shares in the index in the same proportion.

Prashant Maurya, Partner, Citrine Financial Advisors, says, "ETFs have to invest in the proportion of their underlying benchmark. Also, any investor who is investing in a sectoral ETF, must understand the risk involved in the particular sector."

“Investors who are invested in mutual fund schemes must not worry as the fund manager must have worked on the strategy to deal with the mess after the scam unfolded. MF investors at this juncture should trust their fund managers,” adds Maurya.