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Different Strokes

Launch of India's first MF scheme investing in overseas foreign debt securities spread some cheer around. That's about it. Scams continued, latest being a PF scheme scandal. Also, UTI decided against dividend distribution this year for MIP 2000. Overall, debt and gilts were down while equity funds were up, with tech funds taking the lead

The continuing scorching summer didn't cause as much sweat as 'scam' lowdowns did this week. If gilts-Home Trade affair continued to take more co-operative/regional rural banks down, the emerging provident fund scam sent cold shivers down investors' spine. Everyone, including the government, was stumped by the revelation that Seamen's Provident Fund (members: 26,500; corpus: Rs 400 crore of investor savings) was humbled by Rs 92 crore. The reason: officials indulged in g-sec transactions without taking physical delivery.

To make matters worse, there is some more bad news. The culprit: UTI. According to the UTI, there will be no dividend distribution for MIP 2000 (redemption: March 2005) this year. The rationale: the NAV of the scheme is much below its par value of Rs 10. The scheme was launched at the peak of market rally in 2000, with 34% exposure in equity. Subsequently, the market value of its equity holdings came down when the equity markets went southwards which was also followed by the drop in corporate bond yields

However, for those who have invested in MIP 1999, 2000 (II) and (III) and 2001 schemes, there is some good news. The fund house has declared a monthly dividend of 5% annualised each for the first three schemes and 6% in the case of MIP 2001. For those opting for annual dividend option, it will translate into 5.12% payout in the first three cases and 6.17% for MIP 2001.

Soon after SEBI allowed MFs to invest in international sovereign debt and AAA-rated corporate debt instruments in fully convertible currencies, Sun F&C Mutual Fund announced the launch of India's first open-ended income scheme dedicated to investing in overseas foreign debt securities. The market regulator has allowed Sun F&C to invest Rs 17 crore, which will be allocated to investors on a pro-rata basis. No limits have been set for geographical locations, although the fund, initially, will invest in income securities of the US and UK. The fund house plans to infuse funds in 1-3 year maturity instruments. The initial offer is scheduled for May 23 and the issue will close on May 31 this month.

Now, let us move to the funds' performance this week. Well, technology funds stole the show, moving up average 2% over the previous week's NAV. BSE IT Index went up by 2.62%. As for tax-planner funds, they were up 1.31%, while equity diversified funds went up by 1.63%. However, pharma funds took a beating, falling by 1.07%. On the debt front, all fund categories lost except for short-term debt and cash funds, which were the sole gainers.

Fund Update: During the week, the Sensex gained 51 points while the broad-based BSE National Index was up 19 points. The key gainers during the week were Libra Leap (+5.34%), Taurus Starshare (+5.17%), Birla IT (+3.80%), Reliance Growth (+3.57%). The major losers were Tata LIfe Sciences & Tech Fund (-0.51%), UTI Pharma & Healthcare (-0.95%), Pioneer ITI Pharma (-1.06%), Magnum Pharma (-1.20%).