HFCs have become more important after PM announced the 'Housing for all' scheme
The role of housing finance companies cannot be emphasised more, given their role in the affordable housing space. HFCs have gained prominence after PM’s promise of housing for all by 2022. Naturally, the stock price movement of HFCs has been on the up for investors to gain from. However, AMCs have not been able to fully exploit the opportunity, as the SEBI has checks on how much they can take exposure to sectors.
However, in a move that could benefit both investors and the HFCs, SEBI has doubled the limit on permissible holding of bonds of HFCs by mutual funds. “In light of the role of HFCs, especially in affordable housing space, it has now been decided to increase additional exposure limits provided for HFCs in financial services sector from 5 per cent to 10 per cent,” said a SEBI circular. So, effectively, fund houses can invest additional five per cent in excess of 25 per cent, which is the regulatory cap for each sector.
However, to ensure safety, AMCs can only invest in bonds rated AA or above. This move will indirectly help lower rated papers becoming more liquid in the secondary market. As for investors, the higher exposure to a promising sector will help them ride on the gains that seem pertinent.