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Tech stocks can't be written off: UTI chairman

Tamal Bandyopadhyay

Unit Trust of India's exposure to the so-called KP-10 stocks stood at Rs 43.50 billion on April 20-the day finance minister Yashwant Sinha said in Parliament that UTI's exposure to Ketan Parekh stocks was around Rs 60 billion.

It is not known if the exposure has come down due to a fall in market prices or selling by the mutual fund behemoth.

In his first interview since the stock market crisis began, UTI chairman PS Subramanyam told Business Standard on Monday: "We have invested in momentum stocks and not the 'K-10 stocks'. The nomenclature (K-10) is nothing but a media creation. What's wrong with buying these stocks? All research firms had put a buy recommendation on these stocks. All mutual funds and FIIs had invested in these stocks. These were momentum stocks with heavy volumes and great liquidity."

Denying any links with Ketan Parekh, Subramanyam said: "Parekh is not even a listed broker with UTI. We have nothing to do with him or his companies."

UTI's overall exposure to tech stocks has come down drastically to around 18 per cent from a peak of 32 per cent. The tech stock exposure of US-64, the flagship fund, has dropped to 11 per cent.

Subramanyam is, however, still bullish on the tech sector. "In the medium term, tech stocks hold promise. What we have seen now is a temporary aberration. It's a matter of time before the stocks recover. The tech stocks cannot be written off," he said. He also feels that now is a good opportunity to buy tech stocks for those "who have surplus money".

The UTI chairman said the fund was keeping a close watch on the performance of HFCL, where it holds around 11 per cent stake. "The company is fundamentally strong. It has emerged as a major equipment supplier to DoT. It has already established its presence in the Punjab basic circle. Even after the present controversy broke, it has bagged licences for seven basic circles."

But Subramanyam reacted strongly to suggestions that UTI was involved in a bailout of HFCL. "The question of bailing out HFCL does not arise. We had bought about 9.8 million shares of HFCL in early '90s at Rs 60-70 and in the recent past our net purchase of HFCL stock is only 300,000. The average holding cost is around Rs 105 per share," he said.

He also said that UTI had not disbursed loans to HFCL's Punjab basic circle project, HFCL Infotel Ltd. "We have sanctioned only Rs 500 million on the basis of a project appraisal made by the Industrial Development Bank of India. We will be the last lender to disburse the loan," Subramanyam said.

The UTI chairman denied allegations of failure of fund management. "At hindsight, one can say we should have exited when the market was up. We had a growth-oriented Budget and our internal estimate was that the market would look up after the Budget and we would have started selling around that time. But that did not happen," he said, adding that in the first two months of the calendar year, UTI had sold Rs 20 billion worth of stocks across all sectors.

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