Uti'S New Schemes

Though the markets are down, UTI is in the primary market. A look at Master Index Fund, Monthly Income Plan 1998 (II) and Master Value Unit Plan 1998

When the sentiment at the stock markets is poor, new issues almost always get ignored by investors. But that may be just the right time for investors to buy mutual funds as the funds will be invested when the markets are down resulting in decent appreciation. Here are three schemes from the Unit Trust of India.

Master Index Fund

UTI is launching the first index based fund in India called Master Index Fund. The Master Index Fund is an open-ended, pure growth scheme. The units are issued at par and the minimum investment is Rs 5,000. The fund is open for subscription during the entire month of June 1998.

The minimum targeted amount is Rs 50 crore. However the fund has the option to retain the oversubscription amount in full if any. The repurchase will be done at a discount which will not exceed 3 per cent of the net asset value (NAV). Sales by the fund after the initial offer period will not carry any sales load.

The principle objective of the scheme is to invest in securities of companies comprising the BSE sensex and endeavour to achieve return equivalent to sensex by passive investment. This will be done by investing in all the sensex scrips. The weightage of the scrips in the portfolio will be the same as their weights in the sensex which will enable the fund to track the performance of the sensex.

The index fund provides investors with the opportunity to invest in the BSE sensex. Considering the current market levels the investor can stand to gain as the fund has the opportunity to invest in blue chips which are currently quoting at low prices. This is a good option for an investor considering a passive investment strategy.

Master Value Unit Plan 1998

This scheme has been floated by the UTI with the objective of providing capital appreciation by investing specifically in B group scrips of the BSE. Master Value Unit Plan 1998 is a close-ended equity scheme with the option of rolling over for a further period of three or five years.

The units will be issued at Rs 10 and the minimum investment is Rs 5,000. Any further investment will be in multiples of Rs 1,000. The scheme is open for subscription during the entire month of June 1998.

The minimum target amount to be raised under this scheme is Rs 50 crore, and oversubscription if any, will be retained. The units will be listed in the BSE and the NSE, providing the investor an option to exit out of the scheme at any point of time. The scheme plans to get listed within six months from the close of the initial offer period. The scheme will declare its NAV on a weekly basis.

The investment objective of the scheme is capital appreciation through investments in B group scrips of the BSE and similar scrips.

The investment will be done in companies with good medium to long term prospects and are quoting at a low price-earnings ratio. Attractive dividend paying company with low price and those with a low price to book value ratio will also be considered.

The fund at any point will have at least 80 per cent of the funds invested in the B group scrips on the BSE. While the fund is open at a time when the market is down, it may just be able to make some good B group investments which will yield in good returns for investors.

The only problem is that the scheme is closed-ended and investors may not get an exit option (except for the roll-over) because of high discounts of listed closed-ended schemes.

Monthly Income Plan

1998 (II)

MIP 1998 (II) is a five year close-ended income plan. The scheme has three options for the investor: monthly income option, annual income option and cumulative income option. The fund will pay an assured return of 12.5 per cent per annum payable monthly for the monthly income plan and 13.25 per cent payable annually under the annual income option. For the cumulative option a minimum investment of Rs 5,000 will enable the investors to get a minimum return of Rs 9,314 at the end of five years. This effectively means an annual yield of at least 13.25 per cent.

The minimum amount of investment under the monthly income option is Rs 10,000 and for the annual income option, it is Rs 5,000. The issue plans to mobilise a minimum of Rs 100 crore and a maximum of Rs 1,000 crore. Oversubscription above Rs 1,000 crore will be refunded to investors. The exit load for the investors will not exceed 5 per cent of NAV. The scheme will be listed on the wholesale debt segment of NSE within six months from the date of issue close.

This scheme is open for subscription till June 25, 1998. The assurance of returns under this scheme is given on the basis of the guarantee provided by the Development Reserve Fund (DRF) of the trust. As on December 31, 1997 the DRF was about Rs 574 crore. Eight funds have assured returns under the guarantee of DRF.

The primary objective of the scheme is to provide regular income to investors and also capital appreciation. This is planned to be achieved by investing primarily in debt instruments. Investments in debt instruments will be done only in rated instruments which have an investment grade rating by a credit rating agency. Of the total funds mobilised a minimum of 70 per cent will be invested in debt instruments and a maximum of 30 per cent will be invested in equity instruments.

This will give the investors a bit of capital appreciation apart from regular income. The scheme will also invest in government securities without any restriction. This scheme will be attractive for investors looking for assured minimum returns with no upper limit on the maximum.

Of the three funds, the Master Index Fund seems attractive since there is no need for research and with the Sensex at the current low levels, investors can get good returns. The other assured returns scheme MIP 1998 (II) is also attractive and will be appealing for investors looking for a minimum assured return and the safety of investing in debt instruments. The Master Value Plan will be good for the risk-taking investor with its B group exposure.