UTI chairman P S Subramanyam told reporters here today that UTI, which is giving finishing touches to the scheme, hinted that UTI will bear the exchange risk if the government does not do so. The millennium scheme being offered to non-resident Indians will target a mobilisation of $500 million and will be launched in the current fiscal itself.

The millennium scheme which was announced by the finance minister will be different from the Resurgent India Bonds scheme which had mobilised $4.2 billion. In the case of RIBs, the exchange risk is being borne by the government of India.

Though the millennium scheme will be launched before the end of this fiscal, Subramanyam said the exact timing has not yet been decided. ``We will tap the market with the millennium scheme at an appropriate time. The timing of the scheme is crucial to its success,'' he pointed out in his address to aseminar on capital markets organised by Assocham here today.

A major portion of the $ 500 million to be raised through the millenium scheme will be invested in equities. A part of the funds will also be invested in the debt segment to provide stability to the scheme. ``The investments from the proceeds of this scheme will be made in the infrastructure and core sectors,'' the UTI chairman pointed out.

The UTI chairman, who is bullish on the markets and the revival of demand for cement and steel industries, said ``we are looking at a distinct set of NRI investor.'' The investors will share the upside gain under the millenium scheme, said Subramanyam who exuded optimism.

For the stock markets, this means a major support from UTI as the $ 500 million means an inflow of nearly Rs 2,000 crore at current exchange rates. Even if 70 per cent of the mop-up is invested in stock markets, it will mean an inflow of over Rs 1400 crore in the current fiscal.

Though UTI intends to provide stability to the schemethrough investments of a part of the proceeds in debt instruments, a major part has to go to equities to offset the loss arising out of the exchange risk. The capital appreciation could offset the loss on account of depreciation of the rupee to the extent of five to six per cent per annum. This is seen as the average rate of depreciation per year.

Assuming an average depreciation of five per cent, the exchange risk could cost the UTI Rs 100 crore approximately. UTI will, therefore, have to make a gain of at least 20 to 25 per cent to be able to provide decent returns to investors in the millennium scheme.