Mutual Funds
MF investors tried to buy the dip on verdict day. Many ended up buying higher
Summary
- As the net asset values of mutual funds fell on 4 June, thousands of investors rushed to log purchase orders to take advantage of the steepest stock market crash in four years. But many of the orders ended up getting cleared only the following day, when the markets had recovered some of their losses
Thousands of mutual fund investors who rushed to take advantage of the steepest stock market crash in four years on the day of the election results ended up with steep losses as their purchase orders got stuck en route.
Broking platforms such as Groww blame BSE, saying a glitch in the stock exchange's mutual fund system resulted in several purchase orders taking effect the next day, by when the markets had recouped some of their losses. BSE denied responsibility.
The benchmark Nifty index sank 5.9% on 4 June, with the markets disappointed about the Bharatiya Janata Party’s narrower mandate from the 2024 Lok Sabha election. Investors lost about ₹31 trillion on the stock markets on Tuesday.
The net asset values of mutual funds too fell, prompting thousands of mutual fund investors to log purchase orders to take advantage of the crash. But many of the orders ended up getting cleared only the following day, when the markets had recovered 3%.
This may have caused investors a loss of at least 3% on their mutual fund purchases on 4 June, as per Mint's estimates. Those who took the exchange-traded fund route also faced problems, with ETFs trading at a huge premium to their real-time NAVs.
Rajat Mahajan, a Pathankot-based software engineer with a multinational bank, expressed his frustration when he contacted discount broker Groww about technical issues he faced while placing a mutual fund purchase on the platform. Groww is India’s largest stockbroking platform, boasting the highest number of active users in the country.
“I was informed by the customer service team that the fault lay with BSE Star MF for not clearing the transactions on time due to some technical failure," he said. Mahajan then approached BSE Star MF, the stock exchange’s mutual fund system, but was told “they don’t deal directly with clients and Groww has to file a complaint to resolve these issues".
“It is really frustrating because I almost incurred a loss of 10%," Mahajan said. “No one is taking the responsibility."
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“After Sebi’s new regulations on mutual funds non-pool were implemented, payments are directly moved to the exchange, and then to (asset management companies) without the broker/distributor," said a spokesperson for Groww.
Groww informed another investor—as seen in a screenshot of a company reply shared on social media—that BSE handles the entire process of fund collection, order placement, and allocation.
BSE denied all responsibility.
“There was no technical glitch at the exchange end on 4th June. However, there was some lag in receiving payments from the UPI channel for a few customers," said spokesperson for the exchange said.
ICICI Bank and Razorpay, the payment aggregator used by BSE Star, did not reply to Mint’s queries.
More complaints
Another mutual fund investor, Shikhin Gupta from Uttarakhand, said he had placed his purchase order well before the 2 pm cutoff but received the next day’s NAV.
Gupta plans to file a complaint with the Securities and Exchange Board of India (Sebi), and is gathering similar aggrieved investors through WhatsApp.
According to a person with knowledge of the matter, who declined to be named, there was a surge of mutual fund purchase orders on the election verdict day.
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Zerodha Coin—broking platform Zerodha’s mutual fund platform—saw a 100% surge on that day. But 1-5% of the orders did not get through before the cut-off time (2.30 pm for exchange transactions, and 3 pm for others).
Zerodha Coin gets 200,000-300,000 orders on a typical day. Mint estimates that even a 2% failure rate would have resulted in about 12,000 orders failing for Zerodha users alone.
Zerodha didn't immediately reply to Mint's queries.
Some mutual fund websites also failed on 4 June. According to one X user, the UTI Mutual Fund website wasn’t working on 4 June. “Dear Investor, we deeply regret the inconvenience caused and this is not the experience we want you to have. The intermittent issue has been identified and fixed by our team," UTI MF replied to the user on the social media platform.
How to complain
Brokers such as Zerodha, Groww and Indmoney are regulated by Sebi. First, file a complaint in writing with the broker through their customer care portal. If you do not receive a satisfactory resolution you can escalate the complaint on the Sebi Scores grievance redressal platform.
