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Investors looking at a relatively safe bet, especially in the light of the current volatile run in the markets, can buy units of UTI Opportunities fund.
With a proven record of limiting downside as well as outperforming markets in a rally, the fund has established itself across cycles.
Over one-, three- and five-year timeframes, UTI Opportunities has outpaced its benchmark — BSE 100. The level of outperformance has been to the tune of 7-9 percentage points.
In the last five years, the fund has delivered 12.4 per cent returns, compounded annually.
This places it right on top of funds in its category ahead of DSPBR Opportunities, HDFC Growth and Franklin India Flexi Cap.
UTI Opportunities is a predominantly large-cap (greater than Rs 7,500 crore market capitalisation) focussed fund with only 10-15 per cent of the portfolio allocated to mid-cap stocks.
Given the state of markets at present, this may be a relatively safer call as the larger players have better earnings visibility. The fund is suitable for investors with a moderate risk appetite. It also fits the core portfolio of an investor.
Exposure to the units of the fund can also be taken through the systematic investment plan (SIP) route.
PORTFOLIO AND STRATEGY
The fund always maintains cash and debt position of around 7-12 per cent even during periods of market upswing.
During the market correction of 2008-09, UTI Opportunities quickly moved into cash, debt and derivatives to contain the slide in its NAV. This was to the tune of almost 35 per cent during periods of high volatility.
As a result, the fund was among the best in its category in terms of downside containment.
Again, by investing in sectors such as auto, financial services and software, the fund was able to ride the 2009-10 rally quite well. It reduced exposure to sectors such as power and metals.
Last year, UTI Opportunities substantially reduced exposure to banks as concerns rose on increasing NPAs.
Over the past one year, with valuations in this space becoming more attractive, the fund increased exposure to the banking and financial services sectors.
Conversely, steep valuations in quite a few stocks in the consumer non-durables resulted in the fund reducing exposure to this sector. It was the top held sector last year.
The fund, interestingly, has cement among its top few sectors held.
UTI Opportunities thus invests in a blend of momentum and defensive sectors.
The fund predominantly adopts a ‘buy and hold’ strategy. Only three stocks have been exited in the past one year.
It maintains a compact portfolio of about 40 stocks at any point in time. The exposure to individual stocks is restricted to less than 5 per cent barring one or two shares.
Most of the stocks are from the Nifty basket, while others are largely from the BSE 100 index, with some midcaps thrown in as well.
There are some interesting picks with Crisil being among the top few stocks held. Others included in the portfolio are names such as Akzo Nobel, GSPL and Indraprastha Gas.
Overall, the portfolio appears to be geared to deliver steady returns over the long-term, say five years, with limited risk.
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