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July 4, 2001
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Money > Business Headlines > Report July 4, 2001 |
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CII blasts UTI freeze move, calls it breach of faithBS Corporate Bureau In a scathing attack against the decision of the Unit Trust of India to suspend trading in US-64 for the next six months, the Confederation of Indian Industry president Sanjiv Goenka said that this amounts to a breach of faith and fiduciary responsibility, no different from a bank suddenly deciding to shut its windows and leaving depositors in a lurch. "This goes completely against the key attractiveness of the scheme of ready and instant liquidity for small investors and corporate treasuries," he said in a statement issued in New Delhi on Tuesday. Commenting on the timing of the announcement, Goenka said that in a situation where the Indian capital market is being squeezed of liquidity -- especially in the hiatus between the elimination of Badla and introduction of new options and derivatives -- UTI's decision will hurt liquidity even further and erode the faith of small as well as large investors. The argument that US-64 is listed on the wholesale debt segment of NSE and a few minor stock exchanges is, according to CII, of scant comfort to small investors. They will not be in a position to sell their shares without paying very stiff and completely unwarranted brokerage fees. According to CII, large companies will also be seriously affected by this decision. A sizeable chunk of free reserves of major Group A and Group B companies is invested in US-64 for the freedom that its liquidity brings to the treasury managers. "All these companies will suddenly be bereft of this liquidity. This is sure to depress market sentiments even further," the statement said. According to Goenka, the basis of the present crisis is the administratively determined repurchase price of US-64 units is significantly higher than its NAV. As a result, UTI then, and now, have continuously dipped into its reserves to finance repurchase. In a similar attack on UTI's decision, PHDCCI (PHD Chamber of Commerce and Industry) president Sushil Ansal said that it will shake the credibility of not only UTI but also of the other mutual funds and will send wrong signals to the capital market. However, the Federation of Indian Chambers of Commerce & Industry said that following UTI's decision, concerted efforts will have to be made immediately to revive the capital markets. "The only solution to the problem lies in reviving the capital market and in restoring investor confidence," the chamber said in a statement. Powered by YOU MAY ALSO WANT TO READ:
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