| a clean slate
Mumbai, Sept. 2: Days after the government announced the bailout package for Unit Trust of India (UTI), US-64, its flagship scheme, surged by a staggering 20 per cent to Rs 7.15 on the National Stock Exchange (NSE) — shooting past its net asset value (NAV) of Rs 5.95.
Investors were cheered by hopes that a lion’s share of the Rs 14,561 crore meant to resuscitate the Trust will be used to nurse US-64 back to its position of pre-eminence.
The US-64 unit opened at Rs 5.95 and peaked at Rs 7.15. Dealers attributed the surge to the announcement of the revival plan, and also to the expectation that tax sops for unit holders would benefit the new entrants who came into US-64 after the scheme was linked to its NAV.
On bourses, blue chips sizzled on expectations that the mutual fund major would be under less pressure in the coming days to sell shares. The perception that the fund is a big seller may change as the mutual fund giant can hold on till things improve. “The troubles arising out of the redemption pressure in the MIP schemes may no longer be there,” said an broker who picks stocks for a slew of institutional investors.
Meanwhile, sources said UTI was delighted to know that 58 per cent of the IPCL shares it wanted to sell in response to an open offer from Reliance would be bought. “We expected an acceptance in the region of 50 percent. The money has already reached UTI,” the sources added.
UTI-II, the new entity that will emerge after the carve-up, will have a bouquet of NAV-based mutual fund schemes. Sources said they expect the draft of the Ordinance for repealing the UTI Act to be ready in 15-20 days.
In UTI, the mood is upbeat as fund managers concentrate on managing funds, instead of playing trouble shooters every day. “The distress sale of equity by UTI in the markets is fizzling out,” a BSE broker said.
The Confederation of Indian Industry (CII) welcomed the bailout, saying it will restore small investors’ faith in UTI and help revitalise the dormant market.
“It shows that the government is committed, not only to protect millions of small investors but also to restructure UTI along more sensible lines,” president Ashok Soota said.
CII said it had long argued for a rapid and incentive-compatible resolution of what had become an ever-deepening crisis at the Unit Trust.
“The government’s move, therefore, is all the more heartening because it reflects a commitment to save this important organisation by implementing a restructuring package,” it said. “The intervention could not have come at a more opportune moment,” Soota said.
The financial support gives much-needed comfort to UTI and to legions of small investors, offers breathing space to management of the mutual fund major and the government to implement the recast plan.