NEW DELHI, JAN 5: Monthly income schemes of mutual funds are back in action. The first monthly income plan of year 2000 from the Unit Trust of India has mopped up over Rs 1,000 crore. UTI officials said collection figures were around Rs 1,050 crore. ``Since the scheme closed on Monday, we are still collating figures from various centres. Final mobilisation is expected to be in the range of Rs 1,200 crore,'' said a UTI official.The five-year closed-end scheme, which closed for subscription on January 31, 1999, had offered a monthly coupon of 10.25 per cent. This translates into an annualised return of 10.75 per cent.``The cut in the public provident fund rate from 12 to 11 per cent in mid-January helped the scheme garner funds from investors,'' said a UTI official. ``Interest rates are expected to ease further by 30-50 basis points and here, the annualised return of 10.75 per cent turned attractive. The coupon on the next MIP from UTI is expected to be lower,'' adds an analyst. The ICICI Safety Bondissue, which was slated to open in the second week of January, was postponed after the cut in PPF rate. The issue will now open for subscription on February 7 and the financial institution has reduced the coupon under the regular income option by 70 basis points. This also helped UTI mobilise money under the monthly income plan. ``Besides, a number of investors are locking their money under section 54EA in MIP after booking profits in the capital market,'' said an industry observer.In calendar 1999, the MIP series from UTI had mopped up a collective sum of Rs 4800 crore. The first MIP in calendar 1999, MIP '98 (V) mobilised Rs 860 crore. The next MIP in April, 1999 saw a record collection of Rs 2723 crore. The fund had promised a return of 10.75 per cent (11.3 per cent annualised) and it was the last MIP to assure the coupon for the entire tenure of five years. MIP '99 (II), which offered a coupon of 10.5 per cent for teh first year, attracted Rs 1,200 crore.The MIP offers investors monthly, annual andcumulative options with an option of repurchase after three years at NAV-related prices. The capital is assured on redemption by the Development Reserve Fund.While UTI's MIP continues to be a favourite investment vehicle with investors, a number of other mutual funds have now lined up open-end monthly income plans. Tata AMC is also launching a three-year closed-end MIP. ``We are now trying to attract investors initially from the big cities and metros. With effective management of the 15-20 per cent equity exposure, we can give investors returns between 13-14 per cent, which is better than UTI's MIP. Besides, UTI's product now assures returns only for the first year with returns for subsequent years linked to the prevailing interest rates,'' says a fund manager.
