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LAMF Gone Wrong: Investor Loses 40% in Market Fall
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An investor’s equity-backed LAMF turned costly after a 25% market fall caused forced liquidation, highlighting the risks of margin calls and leverage in downturns.
In January 2024, Priya pledged her ₹10 lakh equity mutual fund portfolio to borrow ₹5 lakh through a Loan Against Mutual Funds (LAMF). When markets fell 25% by March, her portfolio’s NAV dropped to ₹7.5 lakh, triggering margin calls. Unable to provide extra collateral, her holdings were liquidated at low valuations. She lost ₹2.5 lakh in notional value and paid roughly ₹50,000 in interest and penalties. The case underscores why borrowers should maintain buffers and avoid leveraging during volatile market cycles.