Investment recommendation platform, PrimeInvestor, issued an ‘exit call’ on all equity and hybrid funds of Quant Mutual Fund. The Chennai-based firm shared the recommendation after the Securities and Exchange Board of India (SEBI) ordered a search and seizure operation at the offices of the fund house on allegations of front running.
Sharing a note with investors, PrimeInvestor said, “We are now uniformly issuing an exit call on all the equity and hybrid funds of Quant AMC, whatever be their call earlier,” reported The Economic Times.
The investment platform stressed that the risk related to the front running news remained two-fold. “One, there will be redemption pressure on the AMCs' funds; and secondly, the stocks (if disclosed or rumoured) on which such front-running was allegedly done may come under selling pressure,” it added.
The investment advise platform said that it remained cautious about the potential redemption pressure on the funds managed by the AMC. “For an AMC like Quant, with a good proportion of mid- and small-cap stocks or low float stocks, high redemption pressure can start impacting NAV and cause damage to the remaining investors,” the platform noted.
The agency stated that an exit from the fund house remained critical as multiple of their stocks were momentum plays, and drastic redemptions and obstructions in inflows could have a huge impact. “While this call may seem rather hurried; however, simple news like this, the actual impact of such front-running notwithstanding, can cause enough damage to sentiment in the AMC and impact redemptions,” the note read.
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Notably, the markets regulator conducted the search operations on the premises of the fund house over the weekend. In response to the situation, the fund house issued an official statement and assured full cooperation with the regulator in its investigation.