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Equity Funds Spring Back to Life

The average diversified equity fund gained a handsome 5.07 per cent while the worst hit technology funds gained a little more

After steep losses since US attacks, the markets gained sharply during the week. The average diversified equity fund gained a handsome 5.07 per cent while the worst hit technology funds gained a little more -- 6 percent. Markets at 2600 on Sensex last week, its eight year low, perhaps it could have only gone up. The top gainers for the week were JM Basic (25.58%), UTI Petro (14.77%) and Alliance New Millennium (8.23%). The sole loser for the week was UTI Pharma and Healthcare (1.38%). For the week ended September 29, 2001, the BSE Sensex gained 211.48 points (8.13%) while the broad based BSE National Index went up by 96.13 points (7.90%). Market were cheerful with brisk purchases by FIIs, lifting of US sanctions and a percent reduction in the interest rates on export credit coupled with recovery in Asian and European markets.

Mastershare Dividend: UTI's Mastershare, the oldest equity fund declared its annual dividend of 10 per cent. The dividend will be tax-free in the hands of investors. The record date for the same is October 19, 2001. The current payout is sharply down from the previous annual payout of 16 per cent in May 2000. Launched in October 1986, the scheme is due for redemption in 2003 and has returned an annualised 17.72 per cent since its launch.

An actively traded closed-end fund, Mastershare trades at Rs. 6.70, at 36 per cent discount to its NAV of Rs. 10.53 on September 19, 2001. The dividend yield on the current market price works out to 14.92 per cent. Though the dividend from the fund will be tax-free in the hands of investors, the fund will be levied an 11 percent dividend tax, being a closed-end fund. And only open-end equity funds are exempt from dividend tax. Hence, the NAV of Mastershare after dividend will be reduced by the dividend amount and dividend-tax as well. Mastershare could be an attractive buy for its deep discount to NAV, an attractive dividend yield and the depressed market level. However, any purchase should be with a view to hold till its redemption in October 2003. LICMF Children Fund: LIC Mutual Fund launched its version of Child Fund. The fund is open for initial offer from 26th September 2001 to 16th October 2001. One can invest a minimum of Rs. 5000 and thereafter in multiples of Rs. 500. The fund would invest 80 to 100 per cent of its investment in debt and a maximum of 20 per cent in equity. After the initial offer period, it will charge an entry load of 1%. For repurchases made within 3 years of investment, an exit load of 3% would be charged, and for repurchases made after 3 years of allotment of investment but before the unit holder completes 18 years of age an exit load of 1.5% would be levied. The fund would not charge any load where the investment has completed 3 years and where the unit holder is over 18 years of age. The scheme has no lock-in period. Besides regular investment and withdrawal plans, it also provides a free personal accident coverage to resident unit holders equal to 10 times the amount invested subject to a maximum of Rs. 3 lakhs.