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June 4, 2001
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Money > Business Headlines > Report June 4, 2001 |
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US-64 outflows exceed inflows in 11 monthsBS Markets Bureau Unit Trust of India's flagship scheme US-64 has seen more outflows than inflows during the 11-month period (July-May) ending May 31, mainly due to redemption pressure from the corporates. UTI follows a July-June financial year. The gross sales (inflow) of the US-64 scheme during this period was around Rs 28 billion against repurchase (outflow) of around Rs 30 billion, leaving a gap of around Rs 2 billion. This gap is likely to widen by June when the fiscal year closes. During July-June 1999-2000, the US-64 scheme had registered gross sales of Rs 46 billion against repurchase of Rs 22 billion, signifying a net inflow of Rs 24 billion. The fund may end up witnessing a net outflow across all schemes by its year-end. Till now, the figure is positive with net sales pegged around Rs 85 billion and repurchase around Rs 75 billion. However, going by the redemption trend, UTI may see a marginal drop in inflow by June-end. This is in stark contrast to a net inflow of around Rs 90 billion last year. "Gross sales this year (July-June) may roughly be 50 per cent of last year's while the repurchase level could remain at the same level, making a marginal negative funds flow by year-end," a UTI source said. The primary reason behind the lukewarm response to US-64 and redemption pressure is the growing apprehensions about the erosion in net asset value (NAV) of the scheme. UTI is expected to make the scheme NAV-linked from February next year, following the recommendations of the Deepak Parekh panel which was set up after US-64 plunged into a crisis in 1999. UTI put up a credible performance last year. "Apprehension on the US-64 NAV dipping below par has triggered a rush by the corporates to get out of the scheme," said an analyst. UTI's novel method to stem US-64 redemptions The Unit Trust of India has found a novel way to block large-scale redemptions of US-64 by corporates. To stem the rush for redemptions in recent weeks, UTI is believed to have told those companies seeking to withdraw from the flagship US-64 that the trust would repurchase their US-64 units by selling their shares held by the mutual fund behemoth. UTI had used this very same method in 1998 at the height of the US-64 crisis when the fund had to pay dividend out of its reserves. At that time corporates like Bajaj Auto and companies from the Birla stable had pressed huge redemption requests which were met by selling shares of Bajaj Auto and Birla group companies like Grasim and Indian Rayon. Over the last few weeks, companies like Bombay Dyeing and Grasim have reportedly pressed huge redemption requests with the Trust. Some of the public sector banks are redeeming US-64 units in a big way. Powered by YOU MAY ALSO WANT TO READ:
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