1. Although the history of liquid funds shows that NAVs have rarely gone below the par value (giving negative returns), there are instances of the same.
2. Facing heavy redemption and – in some cases – write-offs of part of their investments, some liquid funds have given negative returns.
3. In such unusual circumstances, either the fund house, the government or the banking regulator steps in to rescue such funds to instill confidence in the market.
4. However, the negative returns are in single-digit percentage points only.