UTI MF scheme’s rating revised to AA for ‘downward credit migration’

India Rating say downgrade was done because of “downward credit migration in one of the underlying investments” of the fund.

UTI Mutual Fund’s (MF) ultra short term fund has been downgraded by India Ratings from AAA to AA.

“India Ratings and Research has downgraded UTI Ultra Short Term Fund’s National Fund Credit Rating to ‘IND AAmfs’ from ‘IND AAAmfs’ while placing it on Rating Watch Negative (RWN).

The fund is managed by UTI Asset Management Company,” said a statement by the rating agency.

The reason cited for the downgrade was “downward credit migration in one of the underlying investments” of the fund.

Peopl in the know said more debt schemes in the industry could see adverse rating action, as issuers such as the recently-downgraded Dewan Housing Finance have exposures across the industry.

Earlier, the repayment issues around IL&FS’ special purpose vehicle had also triggered adverse rating action on schemes of some of the fund houses.

The MF industry has been facing troubles over debt exposures since the IL&FS crisis tightened liquidity in the debt markets. NBFCs have had to bear the brunt of tight conditions as their business models are heavily dependent on short-term borrowing.