UTI Transportation & Logistics Fund: One and only MF in auto sector

Among other sectoral funds, UTI Transportation and Logistics Fund is the only fund, which stalwartly invests in stocks of automobile and ancillaries’ sectors. COVID-19 has impacted the auto companies quite a bit. However, now, we can see a recovery in S&P BSE Auto Index.

The index was skidding since 2018 and made a low of 10,746 in March 2020. Further, from that point, it recovered close to 53 per cent. Moreover, the further northward journey can only be visible once it breaches the level of 18,946 from below. Now, let us have a look at the performance of UTI Transportation and Logistics Fund.

As we can see, UTI Transportation & Logistics Fund was underperforming S&P BSE Auto Index for over nine years, that is, from August 2005 to December 2014. Thereafter, it is outperforming S&P BSE Auto Index. Despite COVID-19 impact in March 2020, it was outperforming S&P BSE Auto Index.

Looking at its portfolio, this fund holds 35 stocks and is prone to concentration risk as the top 10 stocks hold around 72 per cent of the portfolio, and around 18.39 per cent of the assets are dedicated towards Maruti Suzuki India. This means that there is a possibility that, this single stock can drive this fund up and down.

It is prudent to invest in sector funds in two situations: a) When you wish to take a tactical call and b) When you are knowledgeable about the in-and-out of the sector and understand it better. However, for most people, staying away from sector funds is advisable.