Don’t trust ratings blindly: Sebi to MFs

Mumbai: Markets regulator Sebi on Friday advised mutual fund houses to rely on their own risk assessment rather than depending on the grades assigned by credit rating agencies while picking portfolios.

“We have advised mutual funds that instead of relying completely on credit rating agencies, they must have their own system of risk assessment,” Sebi chairman U.K. Sinha told reporters.

Mr Sinha was talking to reporters after addressing a seminar on corporate governance organised by Excellence Enablers, an organisation run by former Sebi chairman M. Damodaran.

“They must have their own research on various investments and also, we are likely to come out with more guidelines on sectoral as well as company-specific exposures,” he added.

The suggestion from the regulator assumes importance since it comes in the wake of some mutual fund schemes facing huge losses due to sudden rating actions on certain distressed corporate bonds.

In August this year, JP Morgan AMC had asked its investors, who had exposure to the troubled auto component maker Amtek Auto, to take a cut as the stock priced had corrected massively following cashflow issues at the company.

On the much-delayed norms for listing of stock exchanges, especially following the merger of FMC with the Sebi in September, Sinha said the regulator would “very soon” issue fresh guidelines for listing of the exchanges.

“There are some impediments with respect to the listing norms but we are hoping to resolve them very soon,” Sinha said. According to the Sebi chairman, sub-committees have submitted their report on the listing norms for exchanges and the regulator is now looking at it. On algo trading, the Sebi chief said, the technical advisory committee of the Sebi is looking into the set of guidelines.