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US-64 rakes in higher inflows in July - Views on News from Equitymaster
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  • Aug 9, 1999

    US-64 rakes in higher inflows in July

    UTI's flagship scheme has attracted higher net inflows in July 1999. This is despite the fact that it declared lower dividends in FY99 at 13.5% (20% in FY98). Moreover, UTI also increased its sale and repurchase prices last week. However, inflow/outflow figures for the month of July were not available, and the accurate net inflow figure could not be gauged.

    UTI with assets in excess of Rs 610 bn, is India's largest mutual fund. It was set up in 1964, with the launch of Unit Scheme 1964 (US-64), its flagship scheme. US-64, which garnered approximately Rs 250 m in that year, has now accumulated Rs 161 bn, which is larger than the corpuses of a few private mutual funds put together! Therefore US-64's buying and selling operations have a significant impact on Indian stock markets.

    After seeing its portfolio erode over the past year, US-64 has made some structural changes to its portfolio. It has more than tripled its investments in FMCG, IT and pharma, (the golden triangle). Exposure in these three sectors have increased from 7.9% of net assets in June 1998 to 25% of net assets in June 1999. Investments in the golden triangle have come at the expense of PSU stocks, which have been transferred to Special Unit Scheme-99. US-64's large investments in these three sectors will see it compete more evenly with private MFs who have dedicated pharma, IT and FMCG funds. The Deepak Parekh committee has recommended that UTI links its repurchase and sale prices to NAV. This is another factor that has been instrumental in UTI taking a hard look at some of its investments.

    Another factor that has made UTI pull up its socks is the increasing inflows that private MFs have posted in 1QFY2000. For instance, in May 1999, MFs like Kothari Pioneer, Templeton, Birla Sun Life, Prudential ICICI, Zurich India (including ITC Threadneedle) have witnessed large inflows, in some cases higher than 50%. The investor friendly nature of private MFs has compelled UTI to adopt a friendlier stance towards current investors to prevent a flight towards private players.

    Market View:
    As the MF investor gets more perceptive, UTI will have to keep on reviewing its investments more frequently if it has to guard its territory. Moreover, it will have to put on a more investor-friendly appearance, by declaring its portfolio more frequently and offering better services and innovative products. This is the only way it will be able to ward off competition from private players, who will otherwise keeping taking advantage of poor perception of UTI among investors.



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