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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 Name Dec-23 Dec-23 Dec-23 Nov-23 Oct-23 Sep-23
AUM (in Rs. cr) % of AUM No. of Shares No. of Shares No. of Shares No. of Shares
Mirae Asset Large Cap Fund-Reg(G) 37969.2 1.13 6772501 5522501 5522501 5522501
Mirae Asset Focused Fund-Reg(G) 9276.5 2.9 4235151 3506380 3506380 3506380
Quant Mid Cap Fund(G) 4222.4 3.17 2105397 300000 0 0
Nippon India Large Cap Fund(G) 20217.6 0.63 2000000 0 0 0
Mirae Asset ELSS Tax Saver Fund-Reg(G) 20430.8 0.51 1650000 0 0 0
Nippon India Multi Cap Fund(G) 24590.2 0.41 1598104 0 0 0
Mirae Asset Midcap Fund-Reg(G) 13815.1 0.69 1500000 0 0 0
Mirae Asset Large & Midcap Fund-Reg(G) 32492.2 0.28 1452236 0 0 0
Nippon India Banking & Financial Services Fund(G) 5192.5 0.98 800000 0 0 0
Aditya Birla SL Flexi Cap Fund(G) 19340.6 0.24 744612 744612 744612 744612
Aditya Birla SL Frontline Equity Fund(G) 25898.4 0.16 655664 759942 759942 759942
Nippon India Flexi Cap Fund-Reg(G) 5753.1 0.62 557470 0 0 0
Nippon India Balanced Advantage Fund(G) 7484.4 0.47 550000 0 0 0
Nippon India Innovation Fund-Reg(G) 1172 2.96 546130 196130 371130 371130
Motilal Oswal Focused Fund-Reg(G) 1784.2 1.57 441804 684000 884000 884000
Aditya Birla SL Digital India Fund(G) 4590.4 0.59 423754 423754 523754 666918
UTI Innovation Fund-Reg(G) 549.7 4.8 415350 280350 215350 0
Mahindra Manulife Multi Cap Fund-Reg(G) 2664.7 0.95 400000 400000 400000 0
Nippon India Vision Fund(G) 4057.4 0.58 370000 0 0 0
HSBC ELSS Tax saver Fund-Reg(G) 3557 0.56 315600 491000 491000 491000
Aditya Birla SL Equity Advantage Fund(G) 5566.4 0.34 294174 294174 294174 294174
HSBC Large & Mid Cap Fund-Reg(G) 2589.8 0.71 288500 530000 530000 530000
Helios Flexi Cap Fund-Reg(G) 797.1 1.95 244170 150300 0 0
Mahindra Manulife Mid Cap Fund-Reg(G) 1902.7 0.8 240000 180000 100000 0
Franklin India Technology Fund(G) 1189.9 1.23 230649 180000 180000 180000
Mahindra Manulife Large & Mid Cap Fund-Reg(G) 1695.9 0.86 230000 230000 230000 0
Mahindra Manulife Flexi Cap Fund-Reg(G) 1162.5 1.23 225000 170000 170000 170000
HDFC Large and Mid Cap Fund-Reg(G) 15021.9 0.09 220304 220304 220304 220304
Bajaj Finserv Flexi Cap Fund-Reg(G) 2064.1 0.65 209874 338238 271660 134964
Mirae Asset Aggressive Hybrid Fund-Reg(G) 8308.4 0.15 196316 196316 196316 196316
Mahindra Manulife ELSS Tax Saver Fund-Reg(G) 756.3 1.22 145800 110800 35000 0
Mahindra Manulife Aggressive Hybrid Fund-Reg(G) 949.8 0.9 135000 100000 85000 85000
Motilal Oswal Equity Hybrid Fund-Reg(G) 417.9 1.98 130455 130455 130455 130455
Motilal Oswal Nifty Midcap 150 Index Fund-Reg(G) 1248.1 0.64 125054 106408 103323 101763
Quant Teck Fund-Reg(G) 233.9 3.26 120000 120000 120000 0
Nippon India ETF Nifty Midcap 150 1095.4 0.64 109601 94225 93387 98632
Nippon India Nifty Midcap 150 Index Fund-Reg(G) 1045.4 0.64 104609 88758 86603 99028
JM Value Fund(G) 405.6 1.55 98800 79300 79300 79300
Aditya Birla SL Banking & Financial Services Fund-Reg(G) 3062.1 0.2 94985 94985 171600 171600
Union Innovation & Opp Fund-Reg(G) 567.3 0.83 74140 174540 174540 174540
Mirae Asset Nifty Midcap 150 ETF 595.4 0.64 59626 52629 51868 50958
Mahindra Manulife Balanced Advantage Fund-Reg(G) 616.9 0.59 57500 57500 57500 0
Motilal Oswal Nifty Midcap 100 ETF 341.9 0.79 42655 38988 39031 45871
Mirae Asset Banking and Financial Services Fund-Reg(G) 1601.6 0.12 30000 30000 30000 30000
ICICI Pru Nifty Midcap 150 Index Fund-Reg(G) 292.1 0.64 29225 23085 21784 19742
Tata Nifty India Digital ETF 62.3 2.89 28316 27958 28286 24446
Aditya Birla SL ESG Integration Strategy Fund-Reg(G) 725.1 0.24 27800 27800 49032 49032
SBI Nifty Midcap 150 Index Fund-Reg(G) 267.1 0.64 26698 21329 20254 19577
ICICI Pru Nifty Midcap 150 ETF 260.2 0.64 26047 22084 21532 21502
Kotak Nifty Alpha 50 ETF 80.9 2 25459 0 0 0
HSBC Equity Savings Fund-Reg(G) 211.2 0.51 17000 17000 17000 17000
ICICI Pru Nifty Financial Services Ex-Bank ETF 63.4 1.54 15314 12469 12450 11126
Aditya Birla SL Nifty Midcap 150 Index Fund-Reg(G) 150.3 0.64 15036 12646 12623 12135
Motilal Oswal Nifty 500 Index Fund-Reg(G) 658 0.11 11159 9409 9207 8926
Navi Nifty Midcap 150 Index Fund-Reg(G) 96.2 0.64 9613 7803 7302 6923
HDFC NIFTY Midcap 150 Index Fund-Reg(G) 80.5 0.64 8059 6104 5551 4671
Mirae Asset Equity Savings Fund-Reg(G) 834.6 0.06 8000 8000 8000 8000
Bandhan Nifty Alpha 50 Index Fund-Reg(G) 17.8 1.94 5433 0 0 0
Edelweiss NIFTY Large Mid Cap 250 Index Fund-Reg(G) 82.5 0.32 4119 3466 3181 3152
Kotak Nifty Financial Services Ex-Bank Index Fund-Reg(G) 13.2 1.54 3193 2651 2376 2274
Motilal Oswal S&P BSE Financials ex Bank 30 Index Fund-Reg(G) 10.6 1.76 2932 3292 2583 2589
ICICI Pru S&P BSE 500 ETF 166.4 0.11 2902 2712 2586 2461
HDFC NIFTY Midcap 150 ETF 15.2 0.55 1313 1107 1001 899
Groww Nifty Total Market Index Fund-Reg(G) 63.7 0.09 887 625 518 0
HDFC S&P BSE 500 Index Fund-Reg(G) 31.5 0.11 545 408 392 346
Motilal Oswal Nifty 500 ETF 27.8 0.11 467 403 403 403
UTI Nifty Midcap 150 ETF 3.7 0.64 371 425 425 1459
HDFC S&P BSE 500 ETF 6.5 0.11 113 135 135 135

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.

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