UTI declares its dividends in the month of June. Accordingly, the Finance Bill needs to be passed before the end of June 30, the date for declaring the dividend of its flagship scheme US-64 and other schemes, and for this to happen the Budget needs to be passed before that. If this does not happen, in case of fresh elections or a new government with a new budget or a changed Budget, the fate of UTI would be sealed.

In such a scenario there would be one, massive outflows from the flagship scheme US-64, as the dividend paid out would not be taxfree in the hands of the investors, which was major attraction to the investors post-budget to come or remain in the scheme. And second, UTI in order to cover the outflows would have to sell in the market to meet its payments. This means that the stock markets could fall further much more than anticipated as June end is not far off.

This could also mean that the bail out package of giving Rs 4,800 crore worth of securities to the US-64 scheme in lieu of PSU stocks in the portfolio would also get stalled and put the trust further into major jeopardy.

With the massive fall of over 10 per cent in the markets since March 31 to April 17 the opportunity for UTI to book profits at higher levels has also got into a jeopardy. UTI has been investing in bluechips and other stocks at the 3,000 plus levels and if the budget does not get through then the Sensex might falls below the 3,000 levels, which would mean that the selling in the market would be at a much lower level. This means that the dividends might get cutdown a lot this year impacting severely the investor confidence.

The flagship scheme US-64 has an investor base of 2.1 crore unitholders and more than Rs 20 crore of funds under management. US-64 had emerged as the most attractive investment avenue with a tax free yield of 13.33 per cent (assuming the current entry price of Rs 15 and a 20 per cent dividend yield) and scored over all investment avenues. With the announcement of cut in interest rates in the wake of the RBI announcements on March 1 on interest rate cuts the US-64 became even more attractive with the fixed deposit rate of banks and coupon rates of bond offerings slashed.

The fate of the latest MIP '99 which opened on April 5, a five year close ended plan with an assured return of 10.75 per cent with an assured income of 10.75 per cent per annum payable monthly and 11.30 per cent payable annually and cumulative options at 11.30 per cent per annum, also hangs in air. According to the trust collections in the fund had already reached Rs 300crore.