But you said debt funds are safe. Financial advisers and mutual fund distributors must have heard this statement many times over the past week. The trigger was the fall in value of four debt schemes of Taurus Mutual Fund. The net asset values, or price, fell between 7% and 11% over just a day.
Mutual fund investors do not often see these kind of price crashes overnight even in their equity schemes—which are seen to be riskier than debt funds. Worse, the funds were ranked highly by most third-party rating agencies such as Value Research, Morningstar and Funds India (Mint50 does not have recommendations for liquid and ultra short-term debt funds and has done away with looking at star ratings while evaluating longer-tenure debt funds). Investors, distributors and advisers (correctly) find using a star rating an easy way to shortlist funds before they sift further.