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Anirban Nag
Mumbai, Oct 13: The Unit Trust of India has conveyed to its fund managers at an internal meeting that it is moving towards disclosing the US-64's net asset value (NAV). The fund managers, in turn, have passed down the message to treasury chiefs of commercial banks.
In a related move, the Unit Trust has also changed its investment strategy by picking up short-term commercial papers (CPs) of triple-A (AAA) rated corporates. The objective behind the shift--from medium-dated gilts to 60-day CPs--is to stay liquid to meet US-64 redemptions.
"Fund managers in UTI have said that they are moving towards disclosing the NAV of US-64," a treasury chief with a private-sector bank said.
UTI chairman PS Subramanyam has persistently been saying that the US-64 is not a NAV-driven scheme and, hence, there was no need to disclose its asset value. "Since it has not declared NAV ever since its inception 34 years ago, there is no need to declare it now," Subramanyam said after it came to light that the trust's reserves hadturned negative and US-64 NAV had eroded.
Sources said that the UTI move might be a fallout of the fact that the Reserve Bank is exerting pressure on the mutual fund major to become more transparent.
Dealers in the debt market said that UTI has been buying triple-A rated CPs in lots of Rs 3 crore for the past few days. "It has been buying CPs maturing below 60 days to remain as liquid as possible to meet any redemption pressure," a broker handling business for UTI said.
Deals have been conducted at 9.75-9.80 per cent for these instruments, dealers said. "At present, T-bills are being traded below the medium and short-term CPs and, hence, the commercial paper has turned out to be short-term bet for the UTI," a money-market dealer said
Sources said that the mutual fund has bought CPs issued by Reliance, Telco and Exide and negotiations were on for buying CPs of Grasim, MRF, IPCL and TI Cycle.
Last week, the UTI had entered into a repo deal with the State Bank of India, wherein the trust sold gilts toSBI and received funds to meet US-64 redemptions. The move came after the UTI decided to sell its securities portfolio to banks in a bid to stay liquid, which led to a fall in prices of securities last Thursday.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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