Even now the scheme continues to be in safe territory notwithstanding a 13.5 per cent fall in stockmarket indices since June 30. As on date, the NAV of the scheme is in the region of 11.47, thanks to fresh fund inflows.

Estimates of the NAV made on the basis of official figures show that as on June 30, 1998, the unit capital of the scheme was Rs 15,629 crore--or 1562.9 crore units. The total investible funds were Rs 21,371 crore. After accounting for the depreciation provision of Rs 3,566 crore as on June 30, 1998, the market value of the scheme is an estimated Rs 17,805 crore.

In calculating the NAV, it has been assumed that the expenses charged to the scheme were marginal tonil. Thus the NAV works out to Rs 11.39 if the expenses are assumed to be nil. Even if we assume a one per cent expense, the picture does not change much. The NAV would have been a shade lower. The current scenario has improved marginally, though the BSE Sensex is down by 13.5 per cent from the June 30 level of 3250.

The erosion in the market value of equities has been evened out by a net additional inflow of approximately Rs 3,000 crore into the scheme since July 1. The key lies in the fall in the market. The additional investments from the fresh inflows have been made at the much lower prices prevailing in the market since June 30.

Therefore, there would have been hardly any erosion in the value of the additional investments. The current NAV would be approximately Rs 11.47. The additional inflows of Rs 3,000 crore have swelled the total kitty to Rs 24,371 crore. The additions to the unit capital are around Rs 2,127 crore, taking the total to Rs 17,756 crore.

The methodology to estimate the NAV hasbeen the same as the one used for the June 30 calculations. A few more assumptions have been made here: the entire additional investment is spread across the same portfolio prevailing as on June 30 and invested at a lower price. Two, the additional erosion owing to the fall in the Sensex is only on the investible funds as on June 30, 1998.

Assuming a NAV of around Rs 11.40-11.45, the units are currently being sold at a premium of approximately 29 per cent to new investors. This is based on the November sale price of Rs 14.70. In July, on the special invitation price of Rs 14, the premium was 23 per cent. UTI has also announced the sale price for December at Rs 14.80 and the premium works out to 29.8 per cent.

This pricing pattern is not new. UTI has been following a similar pricing pattern over the last three years. For a greater part of this period, the Sensex has hovered around the 2800-3000 level, with two are three short bull runs taking the Sensex to around 4000. In a falling market, what saved thefund from seeing a further erosion was the additional inflows. The danger to the fund comes from a falling market and a rising outflow.

During the year-ending June 30, 1998, the US-64 scheme generated a gross income of Rs 3,340 crore and net income of Rs 3,221.59 crore. The income distribution on account of 20 per cent dividend was Rs 3,124 crore. After making a provision of Rs 3,566 crore for depreciation, the reserves were a negative Rs 1,098 crore. Based on the June 1998 figures, Rs 13,677 crore was invested in equities, while Rs 7,694 crore was accounted for by debt instruments, including debentures and securities besides real estate.

INSIGHT

So long as fresh inflows continue at a steep premium to the actual NAV, it is clear that the NAV of the scheme may continue to increase, inspite of a fall in the market. In any case, it is well known that there have been a lot of pressures on corporates not to redeem their repurchase. The crux of the matter is that UTI is not making money on theinvestments, but it is making money on the new money which is coming in, at a premium. Any scheme will show growth in NAV under such circumstances.