The revival in mid- and small-cap stocks is in progress and large-cap stocks are touching new highs. Funds that invest in a combination of stocks that invest across market-caps may be a good bet at this juncture to tap in to these opportunities.
UTI Equity Funs is such an option. The scheme currently allocates about 64 per cent of its equity assets to large-caps, 30 per cent to mid-caps, and the balance 6 per cent to small-cap stocks.
Following SEBI’s rules on the need for multi-cap funds to have 25 per cent each in large-, mid- and small-cap stocks, some multi-cap funds have become flexi-cap funds to retain the flexibility of allocation.
One needs to wait and watch what UTI Equity decides on this front. Its performance record though gives confidence.
After delivering a below-average performance between 2015 and 2017, the scheme limited the downside well and posted a return of 3.5 per cent in 2018 when the broader market index — S&P BSE 500 TRI — fell1.8 per cent and the category average declined 5.4 per cent.
Thereafter, UTI Equity performed well in subsequent years. In 2020, it delivered a stellar return of 31.5 per cent amid volatility compared with the category’s 15.5 per cent.
Performance
Over the past one, three and five years, the scheme has delivered returns of 35 per cent, 15.8 per cent and 15.9 per cent, respectively, beating the benchmark Nifty 500 TRI returns of 19.6 per cent, 8.4 per cent and 13.5 per cent.
Across time-frames, it has outpaced its peers such as Canara Robeco Equity Diversified, Kotak Standard Multicap (now flexicap fund) and ICICI Prudential Multicap.
You can invest in the scheme through the systematic investment plan (SIP) route to ride out market volatility.
The scheme has a four-star rating under the BusinessLine Portfolio Star Track MF Ratings.
Portfolio choices, strategy
The scheme has a well-diversified portfolio of 40-60 stocks. The top 10 stocks form 43 per cent of the total assets.
The scheme focusses on high-growth and quality stocks as indicated by a high and sustainable return on capital employed (RoCE).
UTI Equity picks stocks with strong earnings quality (high operating cash flow and high free cash flow).
Compared with the benchmark, the fund is largely overweight on IT, consumer goods, pharma and automobile sectors, as these sectors have performed well over the past one year.
The fund continues to remain bullish on the consumer and auto sectors from a long-term perspective, along with the IT sector.
Moreover, the scheme is optimistic on the pharma sector, which has been the least-impacted during the recent market choppiness.
Stocks such as Infosys, Tata Consultancy Services, Bajaj Finance, HDFC Bank and Kotak Mahindra Bank have performed well over the past year, boosting the fund’s NAV.
The fund is underweight on financial services and construction sectors. In recent times, the scheme has upped its allocation to consumer goods, automobile and chemicals while marginally decreasing its exposure to IT, fertiliser and pesticide sectors.
It recently exited City Union Bank and eClerx Services and added 3M India, AAVAS Financiers and Rossari Biotech. The scheme has upped its exposure to Eicher Motors, Mindtree and IndiaMART Intermesh.