Performance of Mutual Fund due to Credit Rating Downgrade

Mutual fund is an investment mechanism, which collects money from investors and invests in diversified area. This is good vehicle for regular investor who doesn't have more knowledge about investment. Objective of this paper is how mutual funds get affected due to downgrade of credit rating. As mutual fund contains diversified portfolio so change in rating of any one company effect whole fund. Mutual fund is rated on the basis of performance of Net Assets Value, Portfolio turnover, risk and return as well as various expenses like Sharpe ratio, Beta ratio etc. Due to downgrade in credit rating NAV decreases, hence fund become risky and interest rate rise. This study provides evidence on the relationship between performance of mutual fund and credit rating. Any change in rating impact the fund. In this paper I explained about the factors that make Credit rating downgrade. As Rating tells about the creditworthiness of the borrower, if borrower having low rating means they are not able to pay principle and interest amount on time. Research methodology I used for this Paper is qualitative research.