Indian capital markets regulator Sebi's latest guidelines restricting investments by mutual funds in debt instruments of Indian corporates, with a sharp reduction in exposure to housing finance companies, hit HDFC, Life Housing Finance on the stock exchanges on Tuesday.
Dewan Housing was down by 3.24% at Rs 215, HDFC was trading lower by 0.70% at Rs 1,153.90 and LIC Housing Finance had edged 2.01% lower at Rs 490.50 minutes before closing.
In its order issued on 11 January, the Securities and Exchange Board of India (Sebi) said that the new limits were aimed at reducing the risks of mutual funds (MFs) to Indian companies and business groups arising out of credit downgrades, besides allowing MFs to diversify.
Sebi reduced the single issuer limit from 15% to 10% of the net asset value (NAV) of a MF scheme, extendable up to 12% after trustee approval.
In case of housing finance companies, the limit has been brought down from 10% of NAV to 5% of NAV.
The new norms will be applicable to both fresh investments by a new scheme or an existing scheme.
From a sectoral viewpoint, the limit has been reduced from 30% of NAV to 25% of NAV to a single sector.
The norms were issued after the Sebi board met in Mumbai on Monday.
Housing Finance companies are heavily dependent on debt and raise a substantial part of their funds through corporate bond market and are therefore feeling the heat, as reflected in their stock prices correcting sharply.
"In the shorter term it may have some impact but looking at the growth of mutual fund's AUM (asset under management), in the longer term it should even out," said V Raghu, executive director at Repco Home Finance, told NDTV.