Should I exit Mutual Fund because of Paytm holding?

Should I exit Mutual Fund because of Paytm holding? As of December 2023, around 68 mutual funds are holding the Paytm stock in their portfolio.

Recent RBI action on Paytm company created a lot of negative news about the company. Many funds are holding this stock. I don’t want to dwell much on what prompted RBI to initiate the action and what is the future of this company. My idea of writing this post is to those mutual fund investors whose funds are holding the Paytm stock.

Mutual Fund because of Paytm holding

As of December 2023, around 68 mutual funds are holding the Paytm stock. In September 2023, the number of stocks holding was 1,77,77,085. It increased to 2,11,46,868 in October 2023. In November 2023, the number of stocks held by Mutual Fund Companies was 2,10,14,596 and in December it was 3,15,10,986.

Do remember that Paytm (One97 Communications Ltd.) is part of the Nifty Midcap 150 Index and as per the current holding structure, its weightage is 0.51%. Regarding the Nifty LargeMidcap 250 Index, the exposure is 0.64%.

The exposure is with respect to indices. Hence, Index Funds have to match the ratio wherever the Paytm stock is there. However, beyond this certain active funds have exposure to this stock. That may be a concern for many active fund investors.

Do remember that this post is not about active vs passive. Currently, passive fund investors may be smiling as the exposure is less. However, in some cases, it may be reversed. Hence, let us not dwell on the aspect of active vs passive.

Below is the list of all mutual fund companies that are currently holding Paytm Stocks (as of December 2023).

Fund NameDec-23Dec-23Dec-23Nov-23Oct-23Sep-23
AUM (in Rs. cr)% of AUMNo. of SharesNo. of SharesNo. of SharesNo. of Shares
Mirae Asset Large Cap Fund-Reg(G)37969.21.136772501552250155225015522501
Mirae Asset Focused Fund-Reg(G)9276.52.94235151350638035063803506380
Quant Mid Cap Fund(G)4222.43.17210539730000000
Nippon India Large Cap Fund(G)20217.60.632000000000
Mirae Asset ELSS Tax Saver Fund-Reg(G)20430.80.511650000000
Nippon India Multi Cap Fund(G)24590.20.411598104000
Mirae Asset Midcap Fund-Reg(G)13815.10.691500000000
Mirae Asset Large & Midcap Fund-Reg(G)32492.20.281452236000
Nippon India Banking & Financial Services Fund(G)5192.50.98800000000
Aditya Birla SL Flexi Cap Fund(G)19340.60.24744612744612744612744612
Aditya Birla SL Frontline Equity Fund(G)25898.40.16655664759942759942759942
Nippon India Flexi Cap Fund-Reg(G)5753.10.62557470000
Nippon India Balanced Advantage Fund(G)7484.40.47550000000
Nippon India Innovation Fund-Reg(G)11722.96546130196130371130371130
Motilal Oswal Focused Fund-Reg(G)1784.21.57441804684000884000884000
Aditya Birla SL Digital India Fund(G)4590.40.59423754423754523754666918
UTI Innovation Fund-Reg(G)549.74.84153502803502153500
Mahindra Manulife Multi Cap Fund-Reg(G)2664.70.954000004000004000000
Nippon India Vision Fund(G)4057.40.58370000000
HSBC ELSS Tax saver Fund-Reg(G)35570.56315600491000491000491000
Aditya Birla SL Equity Advantage Fund(G)5566.40.34294174294174294174294174
HSBC Large & Mid Cap Fund-Reg(G)2589.80.71288500530000530000530000
Helios Flexi Cap Fund-Reg(G)797.11.9524417015030000
Mahindra Manulife Mid Cap Fund-Reg(G)1902.70.82400001800001000000
Franklin India Technology Fund(G)1189.91.23230649180000180000180000
Mahindra Manulife Large & Mid Cap Fund-Reg(G)1695.90.862300002300002300000
Mahindra Manulife Flexi Cap Fund-Reg(G)1162.51.23225000170000170000170000
HDFC Large and Mid Cap Fund-Reg(G)15021.90.09220304220304220304220304
Bajaj Finserv Flexi Cap Fund-Reg(G)2064.10.65209874338238271660134964
Mirae Asset Aggressive Hybrid Fund-Reg(G)8308.40.15196316196316196316196316
Mahindra Manulife ELSS Tax Saver Fund-Reg(G)756.31.22145800110800350000
Mahindra Manulife Aggressive Hybrid Fund-Reg(G)949.80.91350001000008500085000
Motilal Oswal Equity Hybrid Fund-Reg(G)417.91.98130455130455130455130455
Motilal Oswal Nifty Midcap 150 Index Fund-Reg(G)1248.10.64125054106408103323101763
Quant Teck Fund-Reg(G)233.93.261200001200001200000
Nippon India ETF Nifty Midcap 1501095.40.64109601942259338798632
Nippon India Nifty Midcap 150 Index Fund-Reg(G)1045.40.64104609887588660399028
JM Value Fund(G)405.61.5598800793007930079300
Aditya Birla SL Banking & Financial Services Fund-Reg(G)3062.10.29498594985171600171600
Union Innovation & Opp Fund-Reg(G)567.30.8374140174540174540174540
Mirae Asset Nifty Midcap 150 ETF595.40.6459626526295186850958
Mahindra Manulife Balanced Advantage Fund-Reg(G)616.90.595750057500575000
Motilal Oswal Nifty Midcap 100 ETF341.90.7942655389883903145871
Mirae Asset Banking and Financial Services Fund-Reg(G)1601.60.1230000300003000030000
ICICI Pru Nifty Midcap 150 Index Fund-Reg(G)292.10.6429225230852178419742
Tata Nifty India Digital ETF62.32.8928316279582828624446
Aditya Birla SL ESG Integration Strategy Fund-Reg(G)725.10.2427800278004903249032
SBI Nifty Midcap 150 Index Fund-Reg(G)267.10.6426698213292025419577
ICICI Pru Nifty Midcap 150 ETF260.20.6426047220842153221502
Kotak Nifty Alpha 50 ETF80.9225459000
HSBC Equity Savings Fund-Reg(G)211.20.5117000170001700017000
ICICI Pru Nifty Financial Services Ex-Bank ETF63.41.5415314124691245011126
Aditya Birla SL Nifty Midcap 150 Index Fund-Reg(G)150.30.6415036126461262312135
Motilal Oswal Nifty 500 Index Fund-Reg(G)6580.1111159940992078926
Navi Nifty Midcap 150 Index Fund-Reg(G)96.20.649613780373026923
HDFC NIFTY Midcap 150 Index Fund-Reg(G)80.50.648059610455514671
Mirae Asset Equity Savings Fund-Reg(G)834.60.068000800080008000
Bandhan Nifty Alpha 50 Index Fund-Reg(G)17.81.945433000
Edelweiss NIFTY Large Mid Cap 250 Index Fund-Reg(G)82.50.324119346631813152
Kotak Nifty Financial Services Ex-Bank Index Fund-Reg(G)13.21.543193265123762274
Motilal Oswal S&P BSE Financials ex Bank 30 Index Fund-Reg(G)10.61.762932329225832589
ICICI Pru S&P BSE 500 ETF166.40.112902271225862461
HDFC NIFTY Midcap 150 ETF15.20.55131311071001899
Groww Nifty Total Market Index Fund-Reg(G)63.70.098876255180
HDFC S&P BSE 500 Index Fund-Reg(G)31.50.11545408392346
Motilal Oswal Nifty 500 ETF27.80.11467403403403
UTI Nifty Midcap 150 ETF3.70.643714254251459
HDFC S&P BSE 500 ETF6.50.11113135135135

Should I exit Mutual Fund because of Paytm holding?

Let us now discuss more about the core topic of this post.

Do remember that such incidents are common and as a mutual fund investor you are prone to such risks. However, how much % of your fund is holding this stock matters a lot.

If you are a passive investor –

If you are a passive fund investor, you can’t blame anyone as it’s part of the Index. Luckily it is a small part of indeices and hence not a worrying factor.

Do remember that this is the risk with passive funds also. Currently, the company with which the incident happened has less exposure and you may be happy. However, if the incident happens to a company whose exposure is high, then it will impact your holding.

However, as the exposure is small, you may not sense the huge volatility or downtrend in your funds. Hence, as it is not under your control and Paytm’s exposure is small, you do not need to bother. For how many days it stays in the indices due to the continued downfall in its market cap matters a lot.

Hence, as of now, no big concern for passive fund investors. But as I cautioned, Index Funds are not foolproof products to avoid such incidents in the future.

If you are an active fund investor –

If you are an active fund investor, then obviously you have taken a risk of believing in the fund manager’s capability to do research and deploy your money in various stocks. Hence, you have no other option but to continue with the same firm belief. Do remember that fund managers are not gods nor human computers who can perform 100% precisely. Hence, they are also prone to human error, behavior biases, and misjudgment.

If you are comfortable with the exposure, then continue. Otherwise, take a call based on your risk-taking ability, and your belief in fund managers’ strategy.

You noticed that in the case of active funds also, you have no control over how much % the fund manager can invest in a particular sock (in %). Hence, even though the fund is benchmarked to a certain Index, the % of holding may change. Hence, taking a call based on underlying stocks, churning rate, and fund managers history matters a lot.

Lesson – Active Funds are prone to fund managers’ risk and passive funds are prone to construction risk. Choosing the right active and right passive fund matters a lot rather than taking a call based on such incidents. You have to think before investing but not after investing.

2 Responses

  1. Basu,
    I am currently using Kuvera for my MF transactions, Recent news is CRED acquired Kuvera and there are some suggestion that stop using Kuvera. Not sure what is wrong with CRED buying kuvera. Can you explain it

    1. Dear Devan,
      Nothing to worry. Even iff Kuvera shut the door today, your money is safe with AMCs. If you are uncomfortable with this trend, then you can explore platforms like MFU or MFC.

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