Jul 5, 2001|
UTI Ė Not today, maybe tomorrow
If not tomorrow, then maybe day after, but you will be allowed to exit before 6 months. This is what the Ministry of Finance (MoF) seems to have decided to resolve the 6-month moratorium on US-64 sales and repurchases. Investors in the Unit Trust of India (UTI) have some good news to uplift their spirits, if they have any left.
News reports circulating across several business dailies indicate that the ministry of finance is working to resolve the US-64 liquidity crisis so that at least small investors have an exit route. The small investor definition (as per the Companies Act) means that investors with 20,000 worth of units will be able to exit the scheme. (For institutional investors it could be about 10% of their holdings). However, MoFís bailout plan will only get the go-ahead after getting the Prime Ministerís nod of approval.
Reports further reveal that the MoF was taken aback by UTIís unilateral moratorium on US-64. UTIís decision to withhold sales and repurchases without taking the MoF into confidence seems to have peeved off the ministry. But the MoF should not really complain, after all UTI was always the obedient slave that did its masterís bidding when it came to shoring up the markets by buying and selling stocks. The MoF canít seem to stomach the fact that the slave has now taken such a step (and a dramatic one at that) without keeping the ministry in the know.
Another bit of news that may hearten the investor is that UTI Chairman, Mr P. S. Subramanyam has tendered his resignation, finally. Reports indicate that the resignation came after some persuasion and not out of moral responsibility. The Chairmanís rather lively and jovial demeanour in the face of the US-64 crisis was very irritating for investors. It would be interesting to know if he would have been as lively if he had his salary on moratorium for 6 months, which may not be such a bad idea after all.
For the investor, the MoFís rather belated effort to resolve the US-64 crisis is good news nevertheless. If they are allowed to exit the scheme, then itís a positive step to restore investor confidence, which has become conspicuous by its disappearance. However, maybe they should not be too thrilled unless they see the repurchase/sale price at which they will be allowed to exit/enter the scheme.
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