Shares fall in kerb; US-64 scares market again

According to market sources, UTI chairman’s statement to a financial daily on selling equities created panic among brokers. The UTI chairman was quoted saying that the Trust would begin downsizing its equity holding in the next few weeks. Roughly four per cent of Rs 22,000 crore of US-64 equity holdings would be offloaded in the coming weeks, he was quoted as saying.

Marketmen are apprehensive about the UTI’s plan to sell holdings. “Four per cent of the US-64 corpus means sale of shares worth nearly Rs 1,000 crore. It is surprising that the UTI is now openly talking about selling shares in the market,” said a market source who preferred anonymity.

When contacted, UTI chairman was unavailable for comments as he had gone out of the city. Other UTI sources refused to comment about the statement of Subramanyam. “There may be a clarification on Monday,” said a source.

Pawan Dharnidharka,broker, BSE, said the UTI should sell pharma and software scrips as only such shares are in demand. “If dud shares are offloaded, there will be no takers. Only pharma and software shares can be absorbed in the market,” he said. With investible funds of nearly Rs 60,000 crore, UTI is the largest institutional player in Indian markets.

“UTI’s plan may be to reduce the equity holdings under the US-64 scheme. It was only in the last few years it increased its exposure in equities,” said a former UTI official. Out of the US-64 corpus, 64 per cent of the funds is invested in equities and the balance in debt and real estate. Earlier when the equity exposure was at 30 per cent and 70 per cent was in debt, the scheme did not face any problems. The market depression in the last one year led to the erosion in its equity investments.

With the trust planning to restructure its portfolio, brokers are skeptical that it would come to the rescue of the markets in the near future. Normally whenever the markets faced amassive selling pressure, UTI used to purchase shares in a big way to reverse the slide.

In a letter to the Finance Minister Yashwant Sinha, Subramanyam had said that a major part of US-64 portfolio depreciation was caused by investments in PSU stocks like ONGC, Indian Oil Corporation, State Bank of India, Bharat Earth Movers, Shipping Corporation, IDBI and Sail. The UTI chief has said the development reserve fund (DRF), which has been created in the books of UTI, has not been touched for income distribution under US-64. The DRF continues to be a sort of safety net for the Trust’s assured income schemes, he has pointed out. The current corpus of the DRF is about Rs 800 crore.