The Securities and Exchange Board of India (SEBI) on November 26, 2024, issued a circular regarding the Valuation of repurchase (repo) transactions by Mutual Funds.
Chapter 9 of the SEBI Master Circular dated June 27, 2024, on Mutual Funds which specifies the provisions for valuation of investment in securities by Mutual Funds, inter alia mandate that money market and debt securities with residual maturity over 30 days shall be valued as per the prices obtained from the Association of Mutual Funds in India (AMFI) empanelled valuation agencies and the methodology specified therein.
It has been decided that the valuation of repurchase (repo) transactions including TREPS with a tenor of up to 30 days shall also be valued at mark to market basis. Accordingly, clause 9.6.2 of the Master Circular stands modified as follows:
“Investments in short-term deposits with banks (pending deployment) shall be valued on cost plus accrual basis.”
Further, the valuation of all repo transactions, except for overnight repos, in addition to the valuation of money market and debt securities, shall be obtained from valuation agencies. Accordingly, paragraph 9.2.3 (b) of the Master Circular stands modified as follows:
“Valuation of money market and debt securities:
1. All money market and debt securities including floating rate securities shall be valued at average of security level prices obtained from valuation agencies.
2. In case security level prices given by valuation agencies are not available for new security (which is currently not held by any Mutual Fund), then such security may be valued at purchase yield/price on the date of allotment/purchase.”
The provisions of this circular shall come into effect from January 01, 2025.
[Circular No. SEBI/HO/IMD/IMD-I PoD-1/P/CIR/2024/163]
