Stay invested even if your debt funds are hit by IL&FS downgrades until we know its turnaround plan. Any recovery of past dues will shore up NAVs
Debt fund investors have been in a tizzy this past month over the downgrades in credit ratings of Infrastructure Leasing & Financial Services Ltd (IL&FS) and some of its subsidiaries. A total of about 33 funds (across liquid, ultra short-term bond funds, short-term bond funds, credit risk funds, etc.) had these companies in their portfolios; the cumulative value of these holdings in these funds added up to ₹ 2,308 crore as on August-end 2018, according to data from Crisil Ltd. At least three fund houses had to mark down some of their schemes’ portfolios by about 25% to 100% of the value of the underlying securities as IL&FS and some of its companies either saw a sharp fall in their credit rating or didn’t return the principal.