UTI's special offer price for US-64 did not lure investors, as it expected. On the contrary, it witnessed 67% drop in sales under the special price. US-64 mobilised Rs 12.9 bn (Rs 31.1 bn in July 1998). Net inflows amounted to Rs 10.3 bn, after repurchases of Rs 2.6 bn. Total sales also declined by 57% during the month to Rs 17 bn (Rs 39.4 bn in July 1998).

UTI with assets in excess of Rs 530 bn, is India's largest mutual fund. It was set up in 1964, with the launch of Unit Scheme 1964 (US-64), its flagship scheme. US-64 garnered approximately Rs 250 m in that year, and has grown into a Rs 161 bn scheme, which is larger than a few private mutual funds put together! Therefore US-64's buying and selling operations have a significant impact on Indian stock markets.

After seeing its portfolio erode over the past year, US-64 has made some structural changes to its portfolio. It has more than tripled its investments in FMCG, IT and pharma, (the golden triangle). Exposure in these three sectors have increased from 7.9% of net assets in June 1998 to 25% of net assets in June 1999. As expected by market analysts, investments in the golden triangle have come at the expense of PSU stocks, which have been transferred to Special Unit Scheme-99. US-64's large investments in these 3 three sectors will see it compete more evenly with private MFs who actually have dedicated pharma, IT and FMCG funds.

Market View:
As the MF investor gets more perceptive, UTI will have to keep on reviewing its investments more frequently if it has to guard its territory. Moreover, it will have to put on a more investor-friendly appearance, by declaring its portfolio more frequently and offering better services and innovative products. To expect investors to flock around US-64 simply on special offer prices will not be sufficient. It seems from the July mobilisation figures of US-64 that the poor perception among investors still persists. The private players must be rubbing their hands in glee.

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