A debt fund of DSP Mutual Fund named DSP CREDIT RISK FUND was holding IL&FS commercial Paper (CP).
This paper were rated AAA. But last week IL&FS made an interest default hence its rating went down to D. Redemption pressure came to this fund.
Hence DSP MF sold AAA rated 9.1% paper of DHFL as they needed big fund and hence this quality paper was sold at a steep discount to meet the redemptions.
But its repercussion were seen in DHFL stock, thinking its paper was sold at steep discount and hence company must be in some trouble.This led to fear of all NBFCs specially HFC’s will have big problem and it triggered sell off in all the NBFCs. Then followed by banks and YES Bank was already in bad news. Leading to overall sell-off and volatility.