Some mutual fund investors missed out on the budget-induced stock market rally due to some glitches in the National Automated Clearing House (NACH) system.

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In a statement, National Payments Corporation of India (NPCI) said its migration to NACH had some glitches, due to which several mutual fund investors were not allotted units on time. This lead to investors losing out on the bull market rally.

Such technical issues are more common than we think. However, investors can plan and prepare to mitigate such risks.

What was the NPCI issue?

NPCI has recently upgraded its UPI platform to meet the increasing volume requirements and industry demands. However, the new platform faced some teething issues, such as delay in settlements.

Why did it affect mutual fund investors?

Before understanding this, you need to understand how mutual fund investors buy units. One, they must buy before the cut-off time, i.e., 3:00 pm for equity and debt units and 1:30 pm for liquid funds. Two, the funds must reach the mutual fund house before the units are allotted.

According to new Sebi regulations, effective February 1, 2021, NAV is assigned to the units only after the funds reach the mutual fund house. Since due to NPCI glitches, the funds did not reach the houses on time, they were not allotted the units on time. As a result, investors missed out on the rally.

These rules are applied on all types of mutual funds except, systematic transfer plans (STPs), wherein investors can periodically transfer their units from one scheme to another.

How to mitigate risks?

There are several ways by which you can mitigate these risks and get a timely allotment of units. However, a robust solution can come only from Sebi and RBI.

Using the same bank account as your payments intermediary.

You can choose to buy ETFs through your stockbroker. During day trading, you can lock in a specific price.

(Edited by : Jomy)