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If you've the will to arbitrage in US-64, there's a way

B G Shirsat

The Unit Trust of India has thrown open an opportunity for small investors to book instant profits in the US-64 scheme.

Small investors who hold less than 5,000 units (these account for 99 per cent of unit accounts) can sell their units back to the fund at the administered price of Rs 10.50 in January and buy fresh units at a lower NAV-linked price.

For example, the investors could have made a net profit of over Rs 4 on Wednesday at the NAV-linked price of Rs 6.09 per unit and still continue to have the same number of units in their portfolio.

The immediate benefit to small investors is an appreciation of 72.4 per cent even as they maintain their corpus of units.

Additionally, individual unit-holders can claim a capital loss in their income tax calculations since they will be redeeming their units at a price substantially lower than their purchase price.

Immediately, the unit holders can get Rs 4.41 as realised profit which can be reinvested in other instruments. To top it all, there is always the possibility of an appreciation in the unit value of US-64.

The US-64 portfolio is made up of 61 per cent equity investments and 39 per cent debt. Around 85 per cent of the total corpus has been invested in triple A rated debt instruments and fundamentally sound companies.

There is little chance of debt depreciating in a falling interest rate scenario, but the appreciation in equity holdings could be substantial.

Sales of US-64 dip

Fresh sales for UTI's US-64 scheme dipped to Rs 13.5 million on Wednesday as against Rs 24.8 million on Tuesday. The new sales are based on the net asset value without any entry load. Even repurchases were also lower at Rs 98.5 million on Wednesday as against Rs 120.2 million on Tuesday.

Next month onwards, US-64 units will be sold with an entry load of 1 per cent.

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