Mumbai, Feb. 9: The fate of the monthly income schemes of Unit Trust of India may well be decided by the behaviour pattern of the unitholders of US-64.
Strange as it may sound, but if the US-64 investors bite the tax-free bond option offered by the Trust, then the government may well replicate the plan for the monthly schemes.
So for the next few months, both the government and the Unit Trust of India-I will keenly monitor the response of US-64 investors to decide on its course of action on monthly schemes.
“If the government has offered a carrot for US-64 investors, there is no reason to believe that the same will not be offered to unitholders of other assured schemes,” sources said.
“It makes a lot of sense,” they added.
The MIP-98 schemes alone have a combined corpus of Rs 3,108 crore with differing yields, but the redemption amount will be much in excess of that sum.
The government is keen to see that the monthly income plans that hold huge chunk of index heavyweight shares are not unloaded in the marketplace. The move might further soften market sentiments.
“This can be avoided if the government provides a similar tax-saving bond to MIP investors,” Unit Trust officials said.
The government had recently announced a plan to offer US-64 investors tax-saving bonds in lieu of the US-64 units that they hold. The offer was made to circumvent the need of the government to provide cash assistance in order to meet the redemption demand of US-64 investors.
The government is yet to announce the interest yield on such bonds. But it is expected that the rate will be in line with the interest yield prevailing in the markets.
Going by the projections of the experts, the tax-free bonds should carry a coupon rate of around 6 per cent.
According to sources, these bonds may generate interest among corporate investors because the effective yield on these tax-free bonds will be around 7.8 to 8 per cent.
With no ceiling on investment, corporate houses may make a beeline to park their money in these bonds. This is because the 8 per cent RBI relief bonds allow a maximum investment of Rs 2 lakh per annum.
What is more, the proposed bonds will be easily transferable unlike the 8 per cent bonds. These bonds will also be traded on the National Stock Exchange.
Senior Unit Trust officials, including M. Damodaran, the chairman of UTI Asset Management Company, are already on record saying that the tax-saving bonds will be a huge success as corporate houses and high net worth investors will rush for these bonds.