The optimal hedge ratio is calculated by multiplying the correlation coefficient between the equity portfolio and the S&P 500 Index futures by the ratio of the volatility of the equity fund to the volatility of the futures. In this case, the correlation coefficient is 0.89, the volatility of the equity fund is 0.51, and the volatility of the S&P 500 futures is 0.48. Thus, the optimal hedge ratio is:

$h = 0.89 \times \left(\frac{0.51}{0.48}\right) = 0.9456$

The fund manager wants to hedge two-thirds of the USD 60 million portfolio, which is USD 40 million. To find the number of futures contracts needed, we use the formula:

$N = \text{hedge ratio} \times \left(\frac{\text{portfolio value}}{\text{futures value}}\right)$

Plugging in the values:

$N = 0.9456 \times \left(\frac{40,000,000}{(2,120 \times 250)}\right) = 71.3679$

Rounding to the nearest whole number, the fund manager should sell 71 futures contracts of the S&P 500 Index to achieve the hedging objective. This is why option C is the correct answer.