Mumbai: As Jet Airways (India) Ltd moves from flight cancellations to a complete halt, mutual funds stand relatively well-positioned. Few mutual fund schemes are exposed to Jet Airways while there is substantial exposure to its competitors, InterGlobe Aviation Ltd and SpiceJet Ltd, who may benefit from the collapse.
InterGlobe Aviation runs IndiGo, India's largest airline by market share.
In a situation where reportedly 138,000 retail investors are exposed to Jet Airways, the minimal mutual fund exposure to the airline and relatively high exposure to its competitors is a heartening sign for retail investors. SpiceJet shares have rallied by 74.57% over the past one month and InterGlobe Aviation has rallied by 17.69%. Jet Airways, on the other hand, has seen a drop of 30.37% over the past month.
Five actively managed mutual fund schemes, all of Aditya Birla Sun Life Asset Management Co. Ltd, held shares of Jet Airways at the end of March 2019. However, their exposures are extremely low, ranging from 0.43% (in Aditya Birla Sun Life Retirement Fund–40s Plan) to 1.38% of assets (in Aditya Birla Sun Life MNC Fund). On the other hand, 89 mutual fund schemes are exposed to InterGlobe and 24 to SpiceJet.
Exposure in most schemes is relatively small but some have loaded up on aviation stocks. ICICI Prudential Bharat Consumption Fund Series 2, a close ended thematic fund, had 7.67% of its assets in Interglobe Aviation. The scheme had another 2.38% of its assets in SpiceJet.
SBI Focused Equity Fund had 5.28% of its assets in Interglobe Aviation. At the AMC level, SBI Mutual Fund owned 3.052% of Interglobe Aviation’s equity (up from 2.774% in March 2018) and Reliance Mutual Fund owned 2.672% of SpiceJet’s equity (up from 2.231% in March 2018).
Aditya Birla Sun Life Mutual Fund, on the other hand, only marginally pared its exposure. It owned 3.581% of Jet Airways equity at the end of March 2019, down from 3.627% in March 2018, according to data from Value Research.
“The inherently diversified structure of MFs and the regulatory limits on concentration cap the exposure of mutual funds to single stocks. A rally in a single stock or few stocks will not necessarily translate into a rally in the fund as a whole. A stock can give a 200-300% return in a few years, however this is very unlikely in a mutual fund," according to Amol Joshi, founder, Plan Rupee Investment Services.
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