Fund of Fortnight

Ninad Ramdasi / 24-Feb, 2022

/ Categories: DSIJ_Magazine_Web, MF - DSIJ Recommendation, DSIJMagazine_App, Mutual Fund, 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 Flexi-Cap Fund - Direct Plan

Reason for recommendation

The equity market since the start of the year has become quite volatile. There are various factors leading to such volatility, including geo-political tension and higher inflation. In such a scenario, investing in large-cap stocks makes sense as their prices are comparatively stable. A flexi-cap fund that has the flexibility of investing across the market-cap seems to be a good choice now. This is because currently most of them are large-cap-biased and they also give an opportunity to participate in growth of the broader market as they have exposure to such stocks.

UTI Flexi Cap Fund, earlier known as UTI Equity, is one of the top performing funds in the flexi-cap category. The best part of the fund’s performance over the years is that it has lower drawdown. It has a maximum drawdown of 26 per cent compared to index drawdown of 28.81 per cent. Besides, downside capture ratio of the fund is 84 compared to category downside capture ratio of 92, which means that when the benchmark goes down by 100, the fund’s NAV will dip by 84 points only. Hence, in the event of market downturns, the fund is likely to give better protection.

Based on yearly returns, the fund outperformed the BSE 500 TRI (Total Return Index) in the last three years and five years by more than 4 per cent. The fund has a large-cap orientation. As of January 2022, the fund’s exposure to large-cap is more than 60 per cent and the rest is in mid-cap and small-cap stocks. In terms of sector allocation the fund is overweight on technology and healthcare. This may look counter-intuitive currently. However, if the Indian rupee depreciates, we may this sector perform better. Hence, this fund is suited for aggressive investors with an investment horizon of at least three years.