BOI Axa Credit Risk Fund lost 50.22% and BOI Axa Short Term Income Fund 9.5% of its value on 24 April as the fund house wrote down various debt securities. In addition, BOI Axa Conservative Hybrid Fund lost 1.7% of its value. The holdings included DHFL, Avantha Holdings, RKV Enterprise Pvt Ltd, Accelerating Education and Development Pvt Ltd, Coffee Day Natural Resources Pvt Ltd, Dinram Holdings Pvt Ltd and Amantha Healthcare Ltd. They had earlier been written down to varying degrees.

The AMC cited strain placed by the lockdown on corporate balance sheets, tight liquidity in the debt, reduced trading hours as adding to the overall stress in the credit market that has been existent since September 2018. “Considering the severe illiquidity in the debt market, it is estimated that the securities in the portfolio may not be reflecting the realizable value that should form the basis of valuation of NAV of the funds where these securities are held. Hence, the Valuation Committee of BOI AXA Investment Managers on April 24, 2020 has revalued the illiquid and/or thinly traded securities," said a statement from the fund house.

The write down has pushed the 1 year return of BOI Axa Credit Risk Fund to -72.23% and the 1 year return of BOI Axa Short Term Income Fund to -19.74%. “Investors should decide their course of action based on their overall portfolio and risk appetite. If a lot of their portfolio is in equity and they face risk there as well, exit might be the best course of action. On the other hand, if they have secure income from elsewhere they can consider staying put to benefit from a recovery in these schemes," said Vinit Iyer, a Pune based SEBI Registered Investment Advisor (RIA).

Debt funds are operating in an unfavourable economic climate. Investors should take exit decisions after evaluating their overall portfolio, risk appetite and financial goals.

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