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Monday, July 30, 2001

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Markets


UTI chief: A spring of hope?

Nilanjan Dey

HOPE floats. Read his latest interviews in the press, and you will conclude that this is the crux of the message that is being sent out by the UTI Chairman, Mr M. Damodaran. Indeed, the country's biggest fund house, which remains the market's talking poi nt despite the passage of weeks, has been trying hard to placate the sentiment of investors.

One only hopes that UTI would be able to find its feet. That, of course, would take a lot of doing. At any rate, the market is pinning its hopes on the new man at the helm.

For the rest of the market, however, the paradigm is not really shifting. For their part, most broad-based equity funds are not changing their investment strategy. For instance, they are still determined to pick up companies that have the right profile i n terms of business models, technical collaborations, product-mix, competitiveness and financial strengths.

When it comes to the latest capital market-related reforms, one particular fund house has described its attitude in simple words: ``Negatives are obvious and imminent, and hence, widely talked about. However, the positives such as segregation of cash and forward markets, institution of separate modes for hedging, funding and leveraging, and greater institutionalisation of the market need a mention and should be welcomed too.''

Moving over to specific sectors, fund managers are keenly monitoring developments taking place in the domestic pharmaceutical industry. Pharma, once again, is showing signs of getting active, and a number of players in the sector are coming out with exci ting plans.

Domestic MFs are also keeping an eye on the international arena, particularly on the US economy and oil prices. Globally, the equity markets have remained range-bound in recent times, and fund managers here are waiting for sentiment to improve.

On the debt front, MFs are well aware of the industrial slowdown's effect on tax collections, and the resultant impact on fiscal deficit. An investment-led recovery may not be happening in the immediate future, and the situation is likely to remain tough for most investors. In the interim, interest rates would continue to remain soft.

Funds are also aware that the banking system has adequate liquidity, and that there would be no major downside in bond prices from their present levels.

When it comes to selling debt products, distributors need to tell investors about the ground realities, especially the risks associated with investing in this genre of funds. It would be important for them to understand issues such as interest rate risk and credit risk.

Besides, investors should get an idea of the quality of debt funds' portfolios in terms of average maturity profile and return potential (expected average yield).

As for new schemes, Pru ICICI's Child Care Plan will close for subscription this week (August 6). Connoisseurs will do themselves a service if they can take a hard look at this fund's asset allocation plans and the relevant load structures.

Meanwhile, as transaction trends for the month suggest, gross purchases of equity were less than gross sales by Rs 363.78 crore. However, gross purchases of debt were more than gross sales by Rs 1,002.85 crore.

Feedback may be sent to blcal@vsnl.net

Related links:
Separate fund manager for each UTI scheme planned -- Measures launched to win back trust
No fresh sale of units: Damodaran
Damodaran new UTI chief

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