Fund of Fortnight

This is our mutual fund recommendation. Every fortnight ,we recommend one open-ended equity diversified fund that has the best potential of returns for the next one year considering its constituents remain the same. 

UTI Value Opportunities Fund - Direct Plan (Growth)

Reason for recommendation

The equity market is at present unperturbed by the high valuations that the stocks are trading in. In most countries, including in India, frontline equity indices are trading at valuations that have beyond three standard deviation of their long-term average. In such a scenario, investing becomes tricky as the margin of safety is less. Nonetheless, there is one pocket, namely, ‘value’ funds that have largely underperformed their growth counterpart over the last one decade and may continue their better performance going ahead. UTI Value Opportunities Fund is one such fund from this category. The fund was earlier categorised as large-cap and then shifted to flexi-cap before turning into a value fund, changing its portfolio constituents accordingly. With its legacy of being a large-cap fund it had a portfolio tilted towards large-cap stocks; however, now the fund varies its mid and small-cap exposure more widely based on valuation differentials. The fund can potentially go up to 35 per cent in small and mid-cap stocks but currently has an allocation of about 31 per cent. The fund manager follows a mix of top-down and bottom-up approach. When it comes to the valuation of company, the fund manager checks more stable valuation matrices such as price-to-book value that are still in a fair value zone.

The fund takes aggressive sector positions and is currently overweight on financial, healthcare and automobile sectors. Financials made up for almost one-third of the portfolio value at the end December 2020. Within this fund it has added market leaders such as HDFC Bank and ICICI Bank. Even in other sectors the fund has holdings in market leaders only. Looking at the current portfolio constituents and the category that the firm represents, we advise readers with investment horizon of at least two years to exposure in the fund.