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Investors should be wary of unusual price rises as seen by Deutsche AMC in its listed debt scheme

What would you say about a stock price movement that leaves even the owner baffled? Consider this! When Deutsche Asset Management Company (AMC) listed its debt scheme — DWS Fixed Term Fund-Series 43 (growth option) on the Bombay Stock Exchange (BSE) on April 4 this year, little did they know that within a month the net asset value (NAV) would double to Rs 20!

Concerned with the unusual price rise, Deutsche AMC decided to play it safe. By the end of May, the AMC issued a notice in leading papers informing investors about it. Here's how it read: "There is no reason for the listed price to quote at such a significant variance as compared to the underlying NAV." The fund's NAV is now back to its issue price of Rs 10.

Such a rise in the NAV is only observed when such funds approach maturity, which is certainly not the case here. The scheme in question is a three-year, close-ended debt fund that will mature in March 2011.

The mysterious rise in this scheme is not the first and certainly won't be the last. Franklin Templeton's Capital Protection Fund, a debt-oriented scheme, too witnessed similar irrational price hike when it listed last year. This scheme touched an all-time high Rs 273.45 in January. The scheme now trades around Rs 10.

As the market has turned extremely volatile, shrewd market participants have devised innovative ways of making money. The recent spurt in the prices of thinly traded Z-category stocks and a few re-listing cases are also one of them. Retail investors should be wary of such irrational movements in prices.