During the six months following the panic generated by the erosion in the value of US-64, the Trust went to the extent of bringing down its investments in government securities to Rs 272 crore from Rs 1,513 crore. Investments in equity increased from Rs 13,647 crore to Rs 15,188 crore. The result: A greater allocation of risk assets in the total portfolio of the scheme. Equities constitute 80 per cent as on December 31, 1998, against 72 per cent in June 1998.

With a depreciation in the market value of the investments amounting to Rs 4,914 crore, the net asset value of the scheme has dropped from Rs 9.97 to Rs 9.57.

Thebailout strategy worked out for the scheme by the Government pegs the magic figure at Rs 4,914 crore -- a package of Rs 4,800 crore was announced in the budget. This, coupled with the feel-good push to the stock market in the form of tax exemptions for mutual funds, was expected to breath some life into US-64.

UTI, on its own, has added equities worth Rs 1,200 crore in the high growth trio of pharma, information technology and fast-moving consumer goods (FMCG) to its portfolio.

The funds for this investment strategy appear to have been raised by selling government securities worth Rs 1,200 crore out of its debt portfolio.Since December 31, 1998, the stock market has appreciated by around 22 per cent based on the BSE Sensex. This is unlikely to bring any big relief to the scheme as the rally has been aided largely by pharma, FMCG and IT stocks. These three segments have a small share of the overall equity portfolio of Rs 15,188 crore of US-64. In any case, the market rally from around 3,055 points to3,700-plus would help the NAV of the scheme go above the Rs 10 mark.

If we assume a seven per cent appreciation in the market value of US-64 investments, the NAV would have gone up to Rs 10.24; a 10 per cent appreciation would mean an NAV of 10.53; 15 per cent appreciation will yield an NAV of Rs 11.01 and a 20 per cent appreciation will give an NAV of Rs 11.49.

Even in the best case scenario of 20 per cent appreciation in market value, the investments of Unit-64 stand depreciated by Rs 2,089 crore. The pointers are very clear: To maintain the dividend at the current rate of 20 per cent, the scheme has to generate a surplus of around Rs 3,000 crore. The Deepak Parekh Committee report has pointed out that the policy of paying such high returns has forced the Trust to sell liquid stocks. Given the state of the market, U nit Trust of India might be forced to do the same this year too unless fresh investments flow into the fund.