UTI lays blame on corporates
Mumbai--UTI while saying that there was a fair chance of the suspension being reviewed before the six-month period has laid the blame squarely on corporates and their large-scale withdrawals from the scheme towards April-May 2001. Prior to this period the corporate sector comprised about 37 per cent of the scheme’s total investors, while after the withdrawals this would have dipped to below 30 per cent.
Mr Brij Gopal Daga, executive director, said it was clear it was the corporate investors in US-64 who traded regularly in the scheme’s units and were responsible for the sharp increase in repurchases towards the end of the last financial year. UTI has a July-June financial year. He said the retail investors buy units for the long term and forget about it. They are not those who trade in them actively, so they will not all be hurt by the action. But if UTI were to keep the scheme open, and redemptions from corporates continued as earlier, the small investor would be left high and dry at the end of the channel, he said.
Mr Daga said it was also not possible to stop only a section of investors — in this case corporates — from exiting as that would be inequitable and discriminatory.
The total mobilisations under US-64 were Rs 2,661 crore, while redemptions aggregated Rs 5,962 crore, a net outflow of a hefty Rs 3,301 crore during the year. The sharp increase in withdrawals by corporates caused a major dent in the scheme, UTI officials explained. He said a restructuring of the scheme’s portfolio, better value from its investments consequent upon an improved stockmarket situation could well lead to a review of the suspension, since six months was only an outer limit specified by UTI.
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Sinha tells investors not to panic
New Delhi—With investors panicking and the stock markets crashing post suspension on sale and repurchase of US-64 scheme, the finance minister assured investors that they had no reason to panic. He said that the government was scrutinizing the issue closely and would review the entire functioning of Unit Trust of India.

Sinha admitted that UTI’s results were distressing and said that, "We normally prefer financial institutions to function on their own, without interference in their day-to-day working."

The minister also held a round of meetings today with the finance secretary and other officials to assess UTI’s performance. While details were not forthcoming, it is understood that the restructuring of UTI as per the recommendations of the Malegam Committee is likely to be expedited.

The Malegam committee’s terms of reference among other things included a review of UTI’s obligations to existing unit holders under the UTI Act and the implications of any change in this context.
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Stock market crashes by 114 points
Mumbai--After the UTI debacle this was but expected. Stocks fell across the board Tuesday at major stock exchanges and the 30-share BSE Sensex plummeted 114 points by the end of the day’s trading post suspension of US-64, UTI’s flagship. Even as the markets tried to come to terms with life without badla, UTI’s announcement dealt a body blow to sentiment.
Also, the re-emergence of the previously banned short sales on the bourses helped punters to take advantage of this fear psychosis and resort to all-round selling, which resulted in the Sensex losing ground sharply at the close of the day. The SNP C&X Nifty lost 31 points.
The day’s trading saw huge volatility at the bourses, with wide fluctuations in stock prices.
A leading stockbroker said that the sentiment turned bearish on UTI’s move, and more so on counters like Infosys Technologies, Reliance Industries and Satyam Computers because UTI’s holding is said to be huge in these stocks.
Volumes however, were better as markets witnessed delivery-based trading particularly from the foreign institutional investors (FIIs). All frontline counters like Reliance Industries, Infy, Tata Steel, L&T, Zee Tele, Grasim and Hindalco witnessed severe selling pressure after UTI’s announcement that it will have to consider selling its stake in blue chips to restructure its flagship
The trading volumes at the bourses perked up in the wake of participants going short after a quite a period of time, said the dealers. However, no open positions can be kept at day’s end in the rolling regime, and they have to compulsorily be settled at the end of the day’s trading.
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US stocks down
New York—Wall Street stalled on Tuesday and then declined by a fresh round of earnings warnings and low trading volume ahead of the July 4 holiday.
The Dow Jones industrial average was off 24.02 at 10,569.70, in midday trading during an abbreviated trading session scheduled to end at 1 pm (1700 GMT). The broader stock indicators were also flat. The Nasdaq composite index was off 4.15 at 2,144.57, and the Standard & Poor's 500 index was down 1.97 at 1,234.75.
DuPont fell $1.40 to $46.72 after sharply curtailing its earnings estimate for the second quarter, blaming a global economic slowdown and a strong dollar.
Although Wall Street expected the second quarter to be weak, investors were caught off guard by the level of weakness and most companies' inability to predict when the environment will improve.
Even a new Commerce Department report showing US factory orders rebounding in May to their best performance in nearly a year - chiefly on stronger demand in cars and semiconductors - failed to inspire investors.
Also, European regulators, as expected, blocked General Electric's $41 billion purchase of Honeywell International, citing competitive concerns.
GE fell 71 cents at $49.49, while Honeywell rose $1.33 to $35.44 on a report the board of directors was going to replace chief executive and chairman Michael Bonsignore.
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Sebi nod for Cadila's open offer for GRL
New Delhi—The Securities and Exchange Board of India (Sebi) has given the nod Zydus Cadila’s open offer for German Remedies. Minority shareholders have been hotly contesting the offer at Rs 650 per share.
Reportedly Sebi reached the conclusion that the price of Rs 650 per share was justified and the amount of Rs 52.5 crore paid by German Remedies to its parent, Asta Medica for transfer of five brands need not constitute part of the open offer valuation to increase the price. The regulator has upheld the company’s stand that the brands were not the property of the Indian company, German Remedies and their transfer does not affect valuations.
In a previous judgment, Sebi had taken the stand that brands would not constitute part of the open offer valuation.
Cadila won a bid to acquire 27.72 per cent in GRL from German firms Asta Medica and Heller of the Degussa Huls group recently at Rs 650 per share. It paid Asta Medica Rs 52.6 crore for five brands licensed to GRL by Asta Medica. Minority shareholders say the Rs 52.6 crore ought to be factored into the open offer price. The price would then work out to about Rs 880 a share.
Both Asta and Cadila have however, maintained that the brands are not the property of GRL and therefore have been paid for separately.
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