Is Your Mutual Fund Scheme Clutched to Adani Stocks? A Portfolio Review Can Help

February 13, 2023 Mutual Fund

The Adani Group has been making the news headlines in the last couple of weeks for all the wrong reasons. As you may know, the Adani Group is an Indian multinational corporation created in 1988 as a commodity trading enterprise by Mr Gautam Adani, including the flagship company Adani Enterprises. Gautam Adani was the fourth-richest person in the world less than two weeks ago, with an estimated personal fortune of $120 billion.

However, then Hindenburg Research, an American short seller, stunned investors in late January by publishing a report accusing Adani for pulling off ‘the largest con in corporate history’. Adani and his companies were accused of widespread accounting fraud and brazen stock manipulation that allegedly took place over decades.

On February 01, 2023, Adani Group stocks plummeted following a report suggesting that the Swiss investment banker – ‘Credit Suisse’ had ceased accepting Adani Group bonds as collateral for margin loans to its private banking clients. Not only that, but Adani Group Chairman Mr Gautam Adani’s name is reportedly missing from Forbes’ list of the top ten richest people.

Having said that, ever since the Adani fiasco has unfurled, most mutual fund investors have been wondering whether their mutual fund investments are battered in Adani stocks. Following the Hindenburg report, which called the Adani group’s finances into question, most Adani group companies suffered significant losses. Many mutual fund investors, particularly novice investors, are tremendously worried about the current stock market upheaval.

However, controversies aside, although some investors have invested directly in Adani group stocks, what about those who have used mutual funds as a route to invest their money? Investors want to know if they should be concerned about their mutual fund portfolio’s holding in Adani Group stocks.

Several mutual funds hold stocks of Adani Group companies like Adani Enterprise, Adani Green Energy, Adani Ports & Special Economic Zone (SEZ), Adani Power Ltd., Adani Total Gas., Adani Transmission, Adani Wilmar, Ambuja Cement, ACC Ltd., and NDTV. Since Adani Group stocks range across several industries, the impact of their downfall will be on equity mutual funds with exposure to these stocks. According to mutual funds, since some of these stocks are part of the key indices like the Nifty 50, Nifty 100 index and Nifty Next 50 index, the passively managed index schemes and ETFs replicating them will have exposure to Adani stocks.

Which mutual fund houses are holding Adani Group Stocks?

Here’s a list of the top 5 mutual fund houses with high exposure to Adani Group stocks:

(Data as on December 2022)
(Source: ACE MF)  

Do note that, that the fund houses’ high allocation to Adani stocks is solely attributable to their passively managed funds’ exposure to the indices holding such stocks. These passive schemes carry a high exposure to Adani stocks through Index Funds and ETFs route. This is because, the Adani group stocks form part of key indices such as the Nifty 50, Nifty 100 index and Nifty Next 50 index has the highest exposure to Adani stocks at around 9%. As per the recent news, no stocks linked to the Adani Group were removed from MSCI Inc. indexes after its quarterly review; however, the weightage of four Adani Group companies was reduced from the indices.

Apart from this, there is a vast list of fund houses that held allocation to Adani Group companies in their diversified equity schemes and thematic or hybrid schemes. It also includes the large AMC names from the industry like  Aditya Birla Mutual Fund,  Edelweiss Mutual Fund, HDFC Mutual Fund,  IDFC Mutual Fund, IIFL Mutual Fund etc.

In addition to the passively managed mutual funds, below is the list of top 10 actively managed schemes holding high exposure to Adani stocks:

# Includes actively managed schemes with over 2% allocation in Adani Group stocks.
Data as of December 31, 2022
(Source: ACE MF)  

Thus, for a detailed understanding of which mutual fund schemes and indices hold Adani Group stocks you may consider reading, Caught in a Storm: Are Your Mutual Funds Holding Adani Group Stocks?

What should investors holding Adani stocks in their portfolios do?

Indian investors were already apprehensive about the global economic downturn, persistent market volatility, and low returns on equity investments. With the Adani issue, many investors are concerned that the stock market may crash further and their equity mutual funds will incur losses.

Adani stocks are likely to remain volatile in the near term until investors are content with the clarifications and the speculations fade away. If you hold actively managed schemes with higher exposure to Adani Group stocks, this could be cause for concern because it could have a major impact on their NAVs. However, active fund managers have the option to reduce their exposure to Adani Group stocks and even diversify their portfolios.

Given that, this is an ideal time for you to review your mutual fund portfolio. It will assist you in understanding the performance of your investments, exposure to the risky Adani stocks and if any changes need to be made.

Why you should conduct a mutual fund portfolio review now?

A periodic portfolio review (quarterly, semi-annually or annually) is always advisable to assess your progress toward your financial future and ensure your portfolio hasn’t drifted away from the asset allocation that best matches your risk tolerance and time horizon.

Here are a few reasons why a periodic portfolio review is a must:

• It helps you ensure your financial goals remain in accordance to your investments

• Maintain a strategic asset allocation

• Avoids portfolio overlap

• Mitigates concentration risk by diversifying effectively across asset classes and market cap

• Eliminate the underperforming assets that cause low portfolio returns

With all the changes you and your investment portfolio may experience over a period of time, it’s important to evaluate your holdings on a timely basis and make necessary adjustments to maintain a healthy portfolio.

Considering the various investment options available, creating an investment portfolio is not difficult. However, you must be aware of the investment trends, market fluctuations like the Adani saga and other macroeconomic elements that influence the portfolio performance if you want your mutual fund portfolio to generate significant returns. Thus, a periodic mutual fund portfolio review will help you assess all such factors affecting the portfolio performance.

So, the question here is, What is the correct way to begin reviewing your mutual fund portfolio?

Well, I would recommend a hassle-free way for you – Here’s ‘PersonalFN’s Mutual Fund Portfolio Review’ service, which is a personalised portfolio review service designed to boost the returns of mutual fund investors by reviewing and streamlining their existing mutual fund portfolio. All you have to do is follow 2 simple steps:

1. Register for the PersonalFN’s Mutual Fund Portfolio Review service with your details.
2. Fill in the details for questions asked to evaluate the investor’s risk appetite and investment objective.

PersonalFN Mutual Fund Portfolio Review will provide you with the following:

• Your existing Mutual Fund Holding Statement, highlighting the plan & options, the weightage each fund holds in your portfolio, the category & sub-category of the schemes, and the risk each mutual fund investment carries

• A statement of the historical performance of your holdings, including returns generated from each holding across various market cycles, along with benchmark index returns

• Detailed information of AMC-wise portfolio concentration, category & sub-category wise holdings and the sector-wise allocation your existing portfolio holds

• It will provide a risk analysis of your overall portfolio; to help you assess if the schemes held in your portfolio are or are not in congruence with your risk profile

• Detailed information about your existing portfolio’s asset allocation towards various asset classes – Equity, debt, and gold

• At the end, the MFPR service will also provide you with the projected asset allocation based on your risk profile. Further, our experts will provide recommendations – Buy, Hold, or Sell your holdings along with the rationale behind them.

This article first appeared on PersonalFN here