Debt funds pare NBFC exposure, but equity funds keep faith

The crisis around liquidity and defaults in non-banking finance companies (NBFC) has made debt fund managers change stance towards the beleagured sector, but equity funds remain unnerved. Even as debt funds have sharply cut exposure to bonds and debentures of NBFCs over past six months, equity funds continue to maintain exposure to shares of NBFCs and housing finance companies.

The total market value of debt funds’ holdings in NBFCs has reduced by Rs 56,136 crore since September 2018, with these instruments now forming 21.8 per cent of the total corpus in debt funds — down from nearly 29 per cent six months ago. However, equity funds continue to hold around Rs 40,000 crore worth of NBFC shares, suggesting equity fund managers remain confident about their growth prospects. This is even as liquidity concerns have pushed funding costs for NBFCs to multi-year highs in recent months.