Rating downgrades in securities of Reliance Home Finance and Reliance Commercial Finance affected the net asset value (NAV) of some schemes in the debt and hybrid categories of Reliance Mutual Fund and SBI Mutual Fund. The NAVs of these schemed fell by 0.88 percent and 3 percent after the two mutual fund houses have slashed their holdings in these securities, reported The Economic Times, citing industry sources.

CARE Ratings agency cut its ratings on Reliance Home Finance's long-term debt programme of Rs 4,979 crore and long-term bank facilities and non-convertible debentures of Reliance Commercial Finance worth Rs 12,700 crore to default.

Rating agency ICRA has also downgraded Reliance Capital’s short-term debt worth Rs 950 crore to A4. ICRA said, “The rating watch is with negative implications due to the company’s slow pace of monetization of the non-core investments and liquidity position in Reliance Commercial Finance Limited (RCF) and Reliance Home Finance Limited (RHF).”

According to the report, these funds have marked down their securities by 55 percent as per regulatory guidelines. Reliance Ultra Short Term fund's NAV slipped by 1.22 percent, Reliance Credit Risk Fund's NAV dropped by 2.28 percent, Reliance Strategic Debt fund fell by 2.7 percent and Reliance Hybrid Bond NAV shed 1.02 percent.

The valuation of these securities will be written back once they are repaid, said a Reliance Nippon AMC spokesperson to ET, while SBI said the fund house's action is in line with Sebi and Amfi guidelines. However, both the fund houses refused to shares the exact amount by which they marked down the securities, added the report.