NEW DELHI, June 15: Market players no longer sees a saviour in UTI. Though UTI has been stepping in whenever the market dipped, brokers and FIIs do not expect much support coming from the giant. The reason: UTI faces an estimated Rs 2,500 crore of dividend outgo next month. The bulk of the payout will be in US-64, the largest fund in the mutual fund industry with a corpus of over Rs 20,000 crore and an investor base of more than 2 crore.Says a broker even if UTI continues to buy now it will have to sell heavily in July to meet dividend outgo.
Since the nuclear tests were conducted on May 11, UTI has adopted a contrarian approach and has been buying heavily whenever the Sensex shed more than 100 points. According to UTI officials, the mutual fund behemoth has pumped in close to Rs 800 crore since the budget to prop up the sliding prices and has sufficient funds to continue with both their contrarian strategy and pay dividends. However, the first sings of an impending dividend outgo were evident on Mondaywith UTI conspicuous by its absence even though the Sensex dipped by 196 points.
``There was no UTI to resurrect the markets today,'' said a Mumbai-based broker.
``In this kind of a market, you can afford to be a contrarian only when you have surplus funds. UTI, for one, does not seem to have enough funds due to its dividend obligation, '' said an official with an FII brokerage. Some of the market players even hinted that there was no UTI buying in the last two trading sessions.
If UTI remains absent from the market, this may put pressure on other domestic financial institutions and public sector mutual funds like LIC, GIC and SBI to intervene and perk up the market ``It is very very unlikely that UTI will come in the market now because pumping in 200-300 crore is not going to improve market sentiment,'' said an analyst.
A large section of FIIs are however pleased with the role being played by the Unit Trust of India and other domestic institutions on the bourses.
Sources with foreign investmentmanagers point out that buying by UTI helps them exit at better prices. ``Once the market slips by more than 100 points, domestic institutions step in to prop the market. This helps us fetch a better price for our equity shares,'' says one FII source.
``The role of domestic institutions has been confined to not let the market fall by more than 100 points. When the net fall settles around 50-75 points, we stop buying,'' says an official with a domestic institution. FII sources are also gleeful over the role of SBI in supporting the rupee. ``SBI is helping FIIs get dollar for Rs 42.32 while the real value is in the range of Rs 45-50. It is wastage of Indian taxpayers' money,'' added a forex dealer with a foreign bank.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
