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Zerodha, Groww users miss out on gains from June 4 market plunge due to technical glitches

Zerodha and Groww have attributed the mutual fund order delay to technical issues with payment aggregators and compliance with SEBI regulations.

Zerodha, Groww users miss out on gains from June 4 market plunge due to technical glitches

Saturday June 08, 2024 , 4 min Read

Technical issues left several Zerodha and Groww customers, who wanted to invest in mutual funds at discounted prices disappointed, as they missed out on the price plunge on June 4 following the election-fuelled market volatility.

On June 4, the Sensex crashed by as much as 6000 points, attributed to the uncertainty surrounding the outcome of the 2024 Lok Sabha elections, where the Bharatiya Janata Party secured 240 seats, but fell short of achieving the majority mark on its own.

Some retail investors wanted to capture the discounted prices and invested in mutual fund schemes. However, several users of Zerodha and Groww claim that orders placed before the 3:00 PM cutoff time for same-day settlements were only fulfilled the next day, when prices had already risen.

Many retail investors took to social media to voice their concerns.

Retail investor Yogesh Bhutada said that he had received a mail from Coin By Zerodha saying that his order of a Nifty 50 mutual fund by Unit Trust of India had been confirmed at 1:02 PM on Tuesday (June 4). However, he only received confirmation of unit allocation on Thursday (June 6).

As per SEBI mandates, if an investor places an order before the 3:00 PM cutoff time for most mutual fund schemes, they will get the net asset value (NAV) of the same day. If the order is placed after 3:00 PM, they will get the NAV of the next business day.

Net asset value represents the market value per unit of a mutual fund scheme. It is calculated by subtracting the liabilities from the total assets of the fund, and then dividing the result by the total number of units outstanding on a given date.

Bhutada said he raised a ticket on Zerodha, to which the brokerage app replied, "Your mutual fund transactions processed on 4th June 2024 were reported to BSE Star MF after the cut-off time due to an issue with Razorpay. Therefore, your orders were processed based on 5th June."

Razorpay had not confirmed the accuracy of the allegation by the time this article was published. However, Zerodha has since removed any mentions of Razorpay in newer company communications to affected retail investors and now only refers to "Payment Aggregators."

By the time the mutual funds landed in Bhatuda's portfolio, the market had already recovered by nearly 4000 points.

"We work with multiple payment aggregators, and one of them faced issues on Tuesday. Even after pointing out the problem on time, it could not be fixed. As we work with multiple payment aggregators, only a small percentage of the transactions were affected," said Neelesh Verma, Product Head and Assistant Vice-President, Coin by Zerodha.

Groww users also faced similar problems.

"On June 4, some MF customers experienced delayed MF unit allocation due to the delayed money movement between banks, exchanges, and AMCs." Groww said in a statement.

"In MF investments, money flows directly from customer accounts to the banks (managed by payment aggregators or through direct integrations, not touching intermediaries like brokers or MF distributors), where it is aggregated and sent to the clearing corporations. The delay in receiving money by clearing corporation resulted in delayed NAV," the statement added.

However, BSE clarified in a statement that there was no technical glitch at BSE Clearing House (ICCL) on June 4. "Prima facie, there was a lag in receiving details of credit/payments from payment aggregator(s)/bank(s) for few customers which led to the delayed NAV."

This is not the first instance of investors making a notional loss due to technical glitches on brokerage apps. In fact both Zerodha and Groww faced a series of outages in January.

In December 2023, Zerodha released an apology statement after technical glitches prevented users from logging into the Kite web platform.

(The copy was updated to add new information and context)

Edited by Swetha Kannan and Jyoti Narayan