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More woes for US-64

Yet another cup of woes for US-64. The ICE avalanche is believed to have shaved over Rs 1300 crore off the flagship scheme's investments in technology sector. If the sentiment does not reverse soon, UTI may postpone linking of prices of US-64 to NAV.

It's yet another cup of woes for US-64. The ICE avalanche is believed to have shaved off over Rs 1300 crore or 52% of UTI flagship's investments in the technology sector. The exposure, estimated at Rs 2527 crore in December 2000, has seen a steep fall to Rs 1200 crore with the tech-rout on the bourses. US-64 had 13.5% of its assets in technology stocks for December 2000, which is also the last available portfolio for the balanced scheme.

"The sharp fall in equities couldn't have come at a worse time since UTI plans to make US-64 NAV-linked. If the sentiment does not reverse soon, UTI is likely to postpone the linking to NAV since a depleted NAV can trigger a panic. The government will take some urgent steps to restore market's confidence, also keeping US-64 in mind,'' says an official of a Mumbai-based mutual fund. The fund is currently traded on a sale and repurchase price, which is changed on a monthly basis.

While the exposure to individual technology stocks is typically under 4%, it translates into a sizeable absolute number, given US-64's size of around Rs 18,000 crore. Some of its top holdings include Himachal Futuristic, Infosys Technologies, Satyam Computers and Zee Telefilms. In fact, the behemoth has exposure to most of the (in)famous K-10 stocks with holdings in Zee, HFCL, Satyam, Ranbaxy, Global-Tele and Pentamedia Graphics. These stocks, excluding Ranbaxy, have been particularly hammered with an average loss of 66% since December 29, 2000. Among the fund's technology holdings, only Videsh Sanchar Nigam Limited has been able to buck the trend with a gain of 1.75%. However, the gain is paltry and cannot even marginally offset the huge losses on other technology stocks.

On the other hand, the fund is believed to have seen a sizeable appreciation in its holding in Reliance Industries, with the scrip vaulting by over 14% to Rs 389 since December. US-64 owns a whopping 11% in Reliance Industries, but here too, the gains are of little consequence with tech stocks falling like nine pins. The fund's other two prominent holdings, ITC and Reliance Petroleum have also seen a fall with an average decline of 19%.

With the markets in a turbulent phase, it will be a tough task for UTI fund managers to declare US-64's NAV. Nonetheless, the volatility in both debt and equity markets is driving fresh investors in hordes to US-64, given its consistent dividend track record for the last 36 years. The number of new investors have seen a 52% jump from 1.59 lakh to 2.42 lakh for the one year ended February 2001. The net sales of US-64 were at Rs 789 crore, up 63% from Rs 485 crore in the corresponding period in the last year. Hope, the scheme emerges successfully from the current high-pitched volatility and keeps the trust of scores of investors!