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INVESTORS with a penchant for risk may consider exposures in the UTI Petro Fund. The NAV has run-up sharply as oil sector stocks have been in the limelight in 2003. But there may be room for further gains as higher oil prices, better refining margins and enhanced effects of de-regulation get reflected in a more pronounced manner in the performance of the companies.

These stocks have now become an integral part of most diversified portfolios. They now account for close to 25 per cent of the capitalisation of the broad market. Institutional interest is likely to continue at high levels. In this backdrop, investments can be considered. Business Line had recommended partial profit-booking and re-entry at lower level in July 2003. The fund has turned in returns of 38 per cent per annum since mid-1999. During this period, the broad market has been largely flat. Over the past year, the NAV went up about 80 per cent. It is now Rs 20.85.

Suitability: Sector-specific funds carry a higher degree of risk as compared to diversified funds. The UTI Petro Fund is no exception. But it has delivered returns that more than compensate for the higher risk levels involved. The fund has a fairly conservative management style with portfolio turnover ratio at 13 per cent. This has helped it capitalise on the sharp rally in oil-sector stocks.

Enhanced exposures: IOC, ONGC, HPCL, Reliance Industries, IPCL and GAIL.

Stocks out: Kochi Refineries.

Pared exposures: BPCL and Chennai Petroleum

Top five holdings: HPCL, Reliance Industries, Indian Oil, BPCL and ONGC.

Fund flows: Net assets have risen by 13.7 per cent. About 95 per cent is invested in equities and the rest are in cash and cash equivalents. The fund had an asset base of Rs 97.2 crore at the end of August 2003.

Fund facts: UTI Petro Fund was launched as part of the UTI Growth Sectors Fund in May 1999. The entry load is 2 per cent; there is no exit load. The minimum investment is Rs 5,000.

S. Vaidya Nathan

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