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Shanthi Venkataraman

INVESTORS can retain their holdings in UTI Basic Industries. Its performance has been impressive since its launch in April 2004. The fund has a focus on core sectors such as metals, cement and engineering, which have been fancied by the market over the past year and are likely to remain in the limelight, considering the uptrend in metal prices and the boom in construction.

There is, however, a lack of a long-term track record that would normally inspire further investments in the fund. Fresh exposures may be considered only after evaluating its performance over a three-year period.

Suitability: The fund's portfolio has a blend of mid-cap and large-cap stocks and, as such, carries a risk profile similar to other diversified equity funds. While it focuses only on a few sectors, its investments are spread across several stocks. The exposure to any single stock does not exceed six per cent.

The presence of more than 40 stocks in its portfolio, however, would mean getting a greater number of stock calls right. The fund can form part of a diversified portfolio, but should not be a core holding.

Performance: UTI Basic got off to a shaky start as it was launched in the thick of a market correction. Its performance, however, quickly recovered and it has been among the better performing funds in recent quarters.

Over the past year, the fund has delivered a return of about 35 per cent, outperforming its benchmark, the BSE 100, which returned 12 per cent.

While this may lag several of the top-performing funds, the fund still figures in the upper quartile of the performance chart.

Between January and March this year, when several funds suffered declines amid volatile markets, the fund emerged as one of the top-performing funds.

Portfolio overview: The fund started off with a large allocation to the oil sector at about 30 per cent in April. With oil stocks being out of favour, exposure to the sector has now been trimmed to about 15 per cent, but still remains the top sector in the portfolio.

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