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UTI portfolio churning led to Rs 16.22-billion losses

Samata Dhawade

The Unit Trust of India's loss on account of sale/redemption of investments stood at Rs 16.22 billion as on December 31, 2001.

The half-yearly accounts for the period ended December 31, 2001, show that the country's largest mutual fund has shown a positive return on investments in 12 schemes out of 68 schemes.

These 12 schemes managed to book profits to the tune of Rs 319.3 million by churning the portfolio during July-December 2001.

However, the profits could not offset the huge losses of Rs 16.54 billion booked by the institution's 56 schemes.

The losses posted by these schemes also wiped out the total income and pushed the UTI into negative terrain.

Together, income for 56 schemes was a negative Rs 195 million. The 12 schemes that booked profits added to its earning to end with a aggregate income of Rs 2.10 billion as on December 31, 2001.

The flagship US-64 scheme had a maximum loss of Rs 7.29 billion accounting for 45 per cent of the total losses of Rs 16.22 billion. The losses could had been aggravated with heavy redemption pressure in the scheme which may have forced distress sales, despite lower returns.

The scheme had sold off few of its top holding like Reliance Industries, Reliance Petroleum, ITC, HDFC, Hindustan Lever, etc. over the period.

Two debt schemes that followed US-64 in posting high quantum of losses through churning of portfolios are monthly income plan 2000 (MIP 2000) with a loss of Rs 944.1 million and IISFUS 98 with Rs 572.1 million.

G-Sec, a open-ended gilt fund, earned maximum profits through portfolio churning. The scheme's profit stood at Rs 133.5 million as on December 31, 2001. The scheme -- one among the performers -- has earned a return of 14.5 per cent since inception.

This was followed by Master Equity Plan 1995 with a profit of Rs 77.4 million. Booking profit at higher levels at counters like Infosys Technologies, Hindustan Lever, MTNL, Birla Corporation and second rung counters like Agro-Tech Foods, Mukand, SPL, etc. helped the scheme gain.

Mastergrowth earned third largest profit at Rs 62.2 million as on December 31, 2001.

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