Axis Mutual Fund Scam

Axis Mutual Fund Scandal 2022: What it is and everything you want to know

What is Axis Fund Scandal 2022? In simple words, two Axis Bank Mutual Fund managers, Viresh Joshi and Deepak Agarwal were alleged to front run buy and sell of stocks and price rigging. When you have the information of what stocks an organisation would be buying in large quantity, and you buy those stocks before the company buys, being a part of the same organisation is nothing but front running, and is illegal. They have now been suspended from their positions.

Axis Mutual Fund: Investors can be harmed when buying

During the fiscal extremity of 2007-2008, a number of people were hurt by investing in fiscal products called subprime mortgages, which ended up in foreclosure. Subprime mortgages are mortgages issued to borrowers with credit histories that are below the norms of lenders. One of the products that was tied to this kind of loan was called the collateralized debt obligation. Collateralized debt scores (CDOs) were made up of individual mortgage securities. CDOs were packaged and vended to investors around the world. In 2008, numerous people lost their life savings when the casing request collapsed. 

Fiscal extremity

The noise of the slack In 2015, the United States frugality grew at an periodic rate of 3.1 percent, the fastest in four times. The Federal Reserve has kept interest rates low to encourage growth and reduce severance. While the frugality has grown, pay envelope growth has been fairly tepid. The result is that numerous people are not earning enough to pay for their living expenses and are not suitable to save plutocrats to buy their own homes or start their own businesses. The effect has been to produce what is called slack in the frugality. Slack is a time-grounded account term. It means there is not enough work to produce the goods and services people need and want. The term “slack” is used to describe the gap between what people want and what they can do. Some economists say slack makes it delicate to have a strong frugality. 

There is one product that people who do not want to live with the consequences of slack have been looking at. It is called the veritably suitable product, or VSP, for short. The VSP is a withdrawal savings program that provides people with a guaranteed income when they reach withdrawal age. It is a subvention. A guaranteed income is generally handed when people retire either because they can no longer work or because they have not earned enough to pay for the effects they need to live. The VSP provides a guaranteed minimum income for life. As people get older, the income they receive from the VSP increases. When people reach withdrawal age, they have a choice of withdrawing their income from the VSP, or they can admit a lump sum payment. With the lump sum payment, they can pay for the effects they need to live, or they can use their plutocrats to start a new business or to invest in commodities differently that will make them plutocrats.

Demonstration in Feb 22

As per Axis MF note some irregularities have been noticed in Feb-2022 and after inquisition on these irregularities 2 fund executives namely Deepak Agarwal and Viresh Joshi has been suspended. The note states that after 2 months of disquisition action has been taken against the executives however it’s the 4th month that is currently running. The bank has washed away their hands citing they have suspended the fund executives involved in swaddling after being targeted for not mentioning about the depth of damages incurred due to irregularities.

They also mentioned that none should trust the rumors’ circulating in the media.  They also stated that this is an integrity / commercial governance issue. They also mentioned that funds that are invested in index or large cap finance are prone to zero or less damage however for investment in other funds damage is yet unknown.

And if these funds would have been invested in smallcap finance with low volume then the stock prices would have fallen considerably.

If fund executives are the only who are being benefited from these illegal practices, then there is no damage to the MF schemes.

However, if we assume that such sensitive information is shared and everyone except the mutual fund scheme is benefitted then it is a serious problem.

Albeit this might not be the case with indicator finance or large cap finance as their volume is veritably high.

The problem shall arise in smallcap stocks where the volume is low.  Brokers can buy outspoken and sell them on the day when MF house is copping them and make plutocrats.

Front Running: What it is and why it is illegal ?

Front-running is the practice of trading in securities ahead of large customer orders. It is a serious securities transaction offence.  It not only erodes clients trust but can also lead to losses or inferior prices for clients.  Mutual funds originally place large orders which  can sway away securities prices, allowing people with information about the trades to make outsized profit. Those charged for front running, get robust information regarding which stocks will be dealt in large quantities in advance and before this trade shall execute then invest in that stock by their personalized accounts and as soon as the broker executes this order, the value of the share rises and the broker sells the shares he bought booking his profit.

A modest trouble 

The MF house shall dissect multiple stocks & plan to buy or square off them on a specific day or week through their MF portfolios.  However, when stocks are bought or sold in bulk, there are chances of price action i.e. prices of stock can either go upward or can go down.  Fund executives are required to have this information with them handy well ahead of such situation occurs.

The fiscal crunch: Noise of slack

I know in this situation as an investor you are worried about your funds but frankly we can’t do much.  Markets have recently taken a beating resulting in a fall of  NAV. In this phenomenon, if investors of axis mutual funds rush for withdrawal, new fund executives shall be pressured to sell funds at prevailing prices which will create more panic. Analyzing the current scenario I shall suggest investors to take a final call only after we get a clear picture, till then my advice shall be to continue their possession. Albeit you can also halt your SIPs or divert this investment to some other funds until everything is transparent.

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