For instance, the sale price of Masterplus '91 units for March 9 was based on the NAV of March 4, which stood at Rs 21.37. Since the sale price of Masterplus is at NAV, an investor could get units at Rs 21.37. This essentially means that a unitholder could enter the fund on March 4 NAV, knowing fully well that the value of underlying assets is higher, since the market gained another 176 points or 4.88 per cent between March 4 and March 9. However, the sale price of Masterplus units on March 10 is now based on the March 8 NAV of Rs 22.09. UTI has made an identical change in the pricing policy of Primary Equity Fund, Grandmaster and Mastergain '92.

``UTI finally seems to have realisedthe peril of pricing of units, based on historic NAV although there is still a time lag of two days. UTI must completely put an end to this system since in historic pricing, one set of investors cross-subsidise fresh investors in the fund,'' said an analyst.

``In the post-budget spurt, a number of investors have got into UTI's funds at lower NAVs and made a neat gain with exit at a higher repurchase price, despite an exit load. As a result, existing investors have suffered,'' he added.

When markets are volatile, buying units at historic NAV involves a high degree of risk. However, speculators exploit this anomaly in pricing of units to the hilt when the markets are expected to steadily rise over a period of time. For instance, the sale price of Masterplus units on March 3 was based on the February 26 NAV of Rs 19.61. For instance, had an investor bought units at Rs 19.61 and lodged them for redemption at Rs 21.43 (based on the NAV of March 8), he would have seen his investment appreciate by over 9 percent in just seven days, after taking into account the three per cent exit load in Masterplus.