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SEBI wants debt securities marked to market; liquid schemes may be hit the most

September 11
16:56 2019

Market regulator Securities and Exchange Board of India (SEBI) may soon make it mandatory to value debt and money market products in line with the latest market price, reports The Economic Times.

The aim is to boost transparency in bond funds by aligning their values to the market prices, thereby ensuring that the net asset value (NAV) of such fixed income schemes reflect the portfolio’s fair value, the report added.

According to minutes of the regulator’s board meeting held on August 21, “valuation of debt and money market instruments based on amortisation shall be dispensed with and shall completely shift to mark-to-market valuation with effect from April 1, 2020.”

This would mean rather frequent fluctuations in the NAV for fixed income scheme investors. The move would essentially impact all kinds of debt mutual funds (liquid as well as short-term funds) that invest in debt instruments with a less than 30 days maturity period.

However, the move could dampen the popularity of liquid schemes, which is usually where investors park their idle funds for the short-term, the most. The change in valuation methodology could also hit funds with exposure to treasury bills and short-term securities.Not sure which mutual funds to buy? Download moneycontrol transact app to get personalised investment recommendations.

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