THE Unit Trust of India has signaled a falling interest rate regime by stating formally that the dividends from its debt issues would be lower this year. In a statement to the Economic Times, Mr Sen of the UTI stated that "In general, dividends from all schemes including US64 - its flagship scheme will be lower. There is no reason for the investors to expect higher returns."

The recently closed Monthly Income Plan (MIP) '99, which raked in Rs 27 bn, carried an interest rate of 10.75%. The scheme offered investors an assured tax free return of 10.75%, payable monthly during its 5 year tenure. The yield under this option works out to 11.30%. The scheme attracted over 130,000 applications.

Trends in dividend payout have loed investors to believe that UTI will maintain dividends even in a falling market. The statement to the contrary will now definitely affect investor sentiment towards US64, whose dividend is to be announced next month. UTI also lowered the income distribution on all its other MIP schemes launched in 1996 from 12% to 10.75%, hitting investor returns.

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