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Monday,
January 7, 2002, Chandigarh, India   
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Limited options for US-64 investors
Shares are the best bet
Speedy adjudication still eludes consumers |
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Tech, cement pull up Sensex in 2002
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Limited options for US-64 investors THE announcement of the Net Asset Value (NAV) of the US-64 at Rs 5.81 by Mr M. Damodaran, Chairman, Unit Trust of India (UTI), on December 28, has come as a surprise for the 20 million investors of the scheme and market analysts. The investors now have a Hobson’s choice before them — to accept the lower returns for their hard-earned investment or to keep waiting for a miraculous rise in NAV of the scheme. The UTI has now enhanced the repurchase limit of US-64 from 3000 to 5000 units, but the investors with more units have been asked either to wait till May 31, 2003, in order to get Rs 10 per unit or to accept the NAV whichever is higher. In the meantime, they have an option to sell the units at the NAV prices, to be quoted by the UTI. The investors have been assured a price of Rs 10.50 on January 1, 2002, to be increased by 10 paise per unit each month. However, assured prices will be provided only to those unit holders who were registered with the UTI on June 30, 2001. The other investors can purchase and sell units at the NAV prices. The NAV has marginally improved to Rs 6.50 by January 5. Commenting upon the recent developments of the scheme, Mr Tarvinder Dhingra, former Vice President, Ludhiana Stock Exchange and a leading market analyst here, says, “the declared NAV price on December 28 was much lower than the market expectation of Rs 8 to Rs 8.50. In fact, the mismanagement of the UTI has led to such a disastrous situation, that the small investors, including retired government officials, housewives, corporates and other investors, are left with little option. They lack alternative avenues with BSE sensex dropping 17.5 per cent yields in 2001 on 10 year benchmark and government bonds declining 285 basis points.” Elaborating his point, he says that the capital of these investors has already eroded by more than 50 per cent during the past six months since the UTI stopped the repurchase of these units in June 2001. At that time, the UTI was repurchasing these units at Rs 14 per unit against the current average NAV price of Rs 6.00. Mr Dhingra suggests that the investors, who need hard cash or those who are not ready to take any risk with the government institution, could sell up to 5000 units at Rs 10.50 or at 1 per cent increase in rate of interest every month. But other investors should ideally wait till March 31, 2003. The prices on offer then will be higher by about 42 per cent for holdings in excess of 5000 units, and by about 62 per cent for holding less than that. Admitting that small investors have almost lost faith in the government’s financial institution, he reminds them they will not be able to earn so much returns from the stock market or the banks in the next 18 months. Even those who are in dire need of cash, can take some loan from banks or other sources instead of redeeming their units. Further, the large-scale unloading of RIL and RPL shares in the market by the UTI may create a liquidity overhang, that in turn may affect NAV, he adds. There seems to be a consensus among the market analysts that the mismanagement of the scheme has severely eroded the confidence of the investors. The individuals, which comprise about 75 per cent of the total investors, will not have much faith on the country’s largest mutual fund in future. In fact, the UTI had stopped the sale and purchase of US-64 units for six months on July 2, 2001 to stem the exodus of funds. The ban was partially lifted on August 1 after protests from some investors. Now, the UTI has tried to put its own house in order by taking some stringent steps on the recommendations of various expert committees. Appreciating the steps taken by the management, Mr H.S. Sidhu, General Manager-cum- Company Secretary at the LSE points out that the major role of the government mutual fund is to provide a hedging to the small investors against the market fluctuations. He says, “if the investors have earned profits through the scheme, they should be ready to bear some losses, when the management is trying to inject structural changes.” He is also in favour of keeping US-64 units till the promised maturity period. He says, “there is little chance that the NAV prices will cross Rs 10, the assured price to the unit-holders. Further, the UTI has decided to re-position the scheme as a balanced fund, and plans to reduce the equity exposure to a maximum of 55 per cent from the current 61 per cent, which may adversely affect the NAV prices.” He warns that the investors should also understand that the era of assured returns by the Mutual Funds is over, and it may be the last bail-out by the Central Government. The market analysts point out that in terms of market value, 13.86 per cent of the investment of this scheme is in equity shares of Reliance Industries and 4.7 per cent is in Reliance Petroleum, amounting more than Rs 2,500 crore in total on December 28. Altogether, the scheme has put money in invest instruments, including equity shares, preference shares, NCDs, special deposits and term loans of more than 500 companies. The government securities maturing in the year 2004 constitute 26.14 per cent of the portfolio. The other top companies in the portfolio are ITC (5.89 per cent), Infosys Technologies (2.28 per cent), HLL (2.28 per cent), HDFC (2.26 per cent), Jindal Iron and Steel (2.1 per cent), BPCL (1.4 per cent) and SBI (1.35 per cent). Besides equity and debt, US-64 also holds fixed assets worth Rs 192.73 crore. The value of the investment in other companies is estimated at about Rs 136.32 crore. The total unit capital on December 28 was about Rs 12,800 crore. Discounting the pessimistic views, some other stock-market players, like Mr Hans Sakhuja, a leading broker dealing in government securities, are optimistic about the scheme. They feel that with the markets still on the lower side, the impact of restructuring of US-64 will be visible by 12 to 18 months later. “It is right time for other investors to buy US-64 units as the entire portfolio of the scheme has been restructured by making provisions for all NPAs,” says Mr Sakhuja. He points out the UTI has proposed to separate the trusteeship functions from the asset management to instill professionalism by December 31, 2002. The fund will be balanced in favour of debts. The government has already committed to pump in about Rs 5,100 crore in May, 2003, if NAV remains at current value, in order to club the gap between the assured price and the NAV. One of the brokers, however, says, “Despite the government’s assurance, the investors may have to face a difficult situation if any of the High Courts or the Supreme Court decides to bar the government from using tax payers’ money to compensate the investors. Such a writ petition can be expected any time.” |
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Shares are the best bet AFTER
37 years of service in Tisco, Jamshedpur, Mr H.L. Chadha, who retired as an Assistant General Manager from the company, decided not to sit idle. That was when he started Sita Karam Enterprises which manufactures PET bottles. An aggressive investor, he says shares are the best option provided one keeps a regular tab of the equity market. Initial investments In early 70s I got interested in shares after which I have been a regular investor. I surrendered my insurance policy and invested a major portion of the money I got, into shares. Then onwards I started planning my investments, though post-retirement planning I did much later. Equities To invest in share market, however, one needs to have a thorough knowledge and be regularly in touch with the market. Else, it is better to stay away from this sector. I have, currently, shares of HDFC Bank, Infosys, Larsen and Toubro, ICICI and various others. I never concentrate on a single sector and invest only after a thorough analysis of the company’s past performance, future plans, management policies etc. Mistakes in share market Insurance Planning for retirement Other sectors (As told to Shveta Pathak-TNS.) |
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by Pushpa Girimaji Speedy adjudication still eludes consumers THE birth anniversary of the consumer protection law in India went almost unnoticed last fortnight. A pity, because December 24 is now celebrated as the National Consumer Day in recognition of the fact that it was on this day that the consumer Protection Act came into being in 1986. The Act recognised for the first time, the six basic rights of consumers and also gave consumers an exclusive system of consumer justice. An annual event such as this always calls for some celebration, some introspection. And even though I am late by almost a fortnight, I thought I should talk about some of the significant developments of the last one year vis-a-vis the Consumer Protection Act. The first in the list of course is the comprehensive Consumer Protection (Amendment) Bill introduced by the government in the Rajya Sabha. If one were to begin on a positive note keeping in mind the spirit of the new year, one would say that the amendments are very comprehensive and when viewed along with the recommendations of the parliamentary Standing Committee, they are sure to pave the way for better protection of consumers in the country. However, on the negative side, one must point out that the amendments have taken a long time to come and are yet to be passed by Parliament. It was in June 1994 that the Union Ministry of Consumer Affairs constituted a Working Group to suggest amendments to the Act. The Group submitted its report in May 1995, but it was only in April 2001 that the amendments were finally introduced in the Rajya Sabha. The Standing Committee to which the Bill was subsequently referred, submitted its recommendations on November 28. One hopes that the amendments will come through at the earliest at least this year. The year 2001 would be remembered for many a path-breaking decision of the apex consumer court. In the case of Narinder Kumar vs Sanjiv Kumar (RP No 299 of 2000), for example, the National Consumer Disputes Redressal Commission held that disputes pertaining to chit funds too came under the purview of the consumer courts and that the Chit Fund Act did not bar the jurisdiction of the consumer courts from resolving disputes pertaining to chit funds. In the case of S. Somasundaram vs Sri Chakravarthy International Matriculation Academy (FA No 518 if 1994), the National Commission focused on the issue of safety in educational institutions. Directing a school to compensate the parents of a child which drowned in an open septic tank in the school, the Commission made it clear that a school’s responsibility did not end with providing quality education. Safety of the students was as much an integral part of the service provided by educational institutions and consumer courts would not take lightly any dereliction of duty in this regard. There were also several important orders concerning educational institutions. While in the case of M. Ravindranath vs The Principal, Mercy College, Palakkad (RP No 658 of 1007), the National Commission threw open the process of admission in educational institutions to the scrutiny of consumer courts, in the case of Sreedharan Nair vs Registrar, University of Kerala (FA No 643 of 1994), the Commission asked the university to pay damages to a student for the loss suffered by him as a result of the University’s failure to give him a law degree after completion of a three-year course in law. This was the first time that the Commission has asked a university to compensate a student for its negligence. However, on the negative side, I must say that as far as the enforcement of the law is concerned, the performance of the state governments continues to be poor. And speedy adjudication promised under the law still eludes consumers. Of course many of the amendments contemplated in the amendment Bill are aimed at cutting down on delays, adjournments. They are also men at to ensure effective enforcement of the orders of the consumer courts. But for all these to work, state governments should display a definite commitment to the cause of consumers. |
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Tech, cement pull up Sensex in 2002 MARKETS shrugged off weak economy and concerns of war to close the first week of the New Year on a distinctly positive note. The sensex gained about 6 per cent the last week to close at 3375.74. The buoyancy in the market has been attributed to the fact that Infosys Technologies, IT major is scheduled to declare its third quarter results next week. It may give some positive guidance on the future prospects of the software industry. Moreover, the market expects the FII inflows to increase this year because fund allocations are done at the start of the year. The major gainers in software during the past week were Satyam Computers (up 22 per cent), Infosys (up 11 per cent), Wipro and HCL Tech (both up nearly 12 per cent). Satyam Computers/Infosys Satyam Computers was the star performer of the week. It gained over 22 per cent during the period. The sharp surge on the counter was accompanied by a spurt in volumes. From a 52-week low of Rs 113.10 on September 21, 2001, the scrip is up 141.9 per cent. One rumour doing the rounds is that Satyam has tied up with a consultancy firm, KPMG. The stock has also been firm for some time on talks that it is planning to sell a part of its stake in its Internet subsidiary Satyam Infoway. Satyam Computers currently holds 52.5 per cent stake in Satyam Infoway. Satyam Computers closed the week at Rs 272.3. Infosys was also among the major gainers, it gained about 11 per cent during the week to close at Rs 4484.05. Market expectations are that Infosys Technologies would revise upwards its future earnings estimate while announcing its third quarter results next week. Analysts tracking the technology sector say that last week’s surge in Infosys was on fresh buying amid expectations that the worst is over for the technology stocks. Hero Honda The motor cycle manufacturer was in the thick of action ahead of its inclusion in the 30-share BSE Sensex from January 7, 2002. Incidentally the auto major is scheduled to declare its results for the third quarter the same day. Last week, the company reported a 45.6 per cent surge in its December 2001 bike sales to 1.22 lakh. Simultaneously, the company has also raised the sales target for FY 2002 to 1.4 million units from 1.3 million because of higher rural demand. This is the second revision in its sales target by the motorcycle major following buoyant sales. The stock closed the week at Rs 283.8. ACC/L&T Cement scrips were also instrumental in the northward bound journey of the Sensex. The cement majors ACC and L&T closed the week with gains of 17.45 and 6.29 per cent respectively. ACC declared after trading hours on Friday that its December 2001 cement dispatches rose 33.3 per cent to 9.84 lakh tonnes. Besides growth in dispatches, the talks about a forthcoming hike in cement prices has boosted cement shares. As regards market talks, cement markets are likely to resort to a fresh hike in cement prices by Rs 7 per 50 kg bag in Mumbai from 15 Jan 2002. Construction activity usually gains momentum there around January every year. Coming fortnight The market sentiment has improved on hopes of good quarterly results from most of the tech and cement companies. Aggressive institutional buying and the easing of tension on the Indo-Pak border has also led to the up-trend. The immediate resistance for the sensex is at 3380-3396. If it breaches that the market may gain another 100 points, with the next resistance level placed at 3,460-3,465. However, the tension at the Indo-Pak border is a cause for concern. Investors may sell some tech stocks on every-up-trend and cover up their positions on corrections. Medium-term investments can be contemplated is such cement and pharma stocks as ACC, Grasim, Glaxo and Pfizer. |
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Inflation falls Saraswati Mills Tisco wins award |
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