According to the portfolio for the December 2000, around 10-12 per cent of the estimated scheme corpus of Rs 20,000 crore is invested in the ICE sector alone. Even higherexposure in old economy stocks such as Reliance Industries has failed to stem the slide in net asset value (NAV) of the scheme.

Moreover, owing to the market debacle, the repurchase price seems much higher than its NAV. However, there are certain caveats to this. Firstly, the scheme is not NAV-based and investors flock it because of the assured fixed returns it offers. The NAV of the scheme, estimated around Rs 14-15, is however, not made public.

Of the 75 per cent of the US-64 portfolio declared by the UTI, roughly 75 per cent of it is in equity investments. As per the data available with The Financial Express, equity contributes around Rs 11.25 (75 per cent of the NAV of Rs 15) and the rest Rs 3.93 comes from the 22 per cent investments in debt instruments.

With the Sensex market capitalisation having lost 35 per cent post-Budget, the returns from the equity exposure thus would be lower at Rs 7.31. Factoring in the 18 per cent appreciation in debt investments, the NAV comes to Rs 11.56. Interestingly, for the last two months, the schemes repurchase and sale price have been on the rise. Repurchase price for this March is at Rs 14.40 while the sale price is at Rs 14.10. For Februrary, the sale/repurchase price stood at Rs 14.30 and 14 respectively.

The US-64 still continues to have an overwhelming exposure in equities. It may be recalled that a high level of equity exposure was responsible for the US-64 crisis in 1998.

Two of the the recommendations of the Deepak Parekh committee was to scale down the equity exposure to moderate levels and that the UTI should align its NAV with its sale and repurchase prices like any other scheme within three years.

At the height of the US-64 crisis in 1998, the NAV had fallen to Rs 9.57. Had the NAV been made public then, it might have resulted in huge redemption pressure bringing the UTI as well as the market to its knees. However, the NAV of the scheme was estimated at around Rs 18 before the meltdown. This price was above the scheme's repurchase price. If at this juncture, the UTI was to declare the NAV it could result in huge arbitrage opportunities for the bigger players! The timing, therefore, is of immense importance for this move.

Ironically, this drop in NAV is despite the government reducing the small savings rate by 1.5 per cent. Therefore, in the current scenario, other mutual funds seems a better investment. The total tax impact, both on dividend and long-term capital gain, would only be 10 per cent when compared to the other avenues where one would be paying at the same income tax slab rates. However, the crisis in the stock markets has sapped the common investor's confidence even further.