The Hindu Business Line : UTI Mastergrowth: Hold

Investors in UTI Mastergrowth can retain their units in the fund. Over the years, UTI Mastergrowth has turned out to be a steady performer, its consistent showing continuing through 2005.

In terms of returns, though, it under-performed in 2005. High exposure to PSU stocks pulled down returns as this sector lagged the market considerably. Equity funds such as UTI Mastergrowth and Templeton India Growth paid a heavy price for staying invested in oil sector stocks. The fund, though, outperformed the Nifty in each of the earlier four years.

UTI Mastergrowth is, generally, not the kind of fund to deliver outsized returns. It usually outperforms benchmark indices only by a modest margin each year. What would endear the fund to investors, however, is its consistency.

The fund has beaten Nifty's returns in 40 of the past 61 months, even after the strain imposed by PSU stocks on portfolio performance in 2005. The returns fluctuate less in comparison to the Nifty's returns. The average monthly returns, however, are higher than that of the Nifty. The fund outperformed Nifty in 2005, even during periods of market downturn.

Given the rich valuations, staying invested in this fund appears a prudent option. In addition, the forthcoming Budget could create a favourable environment for public sector banking and oil stocks. That could boost fund performance.

Portfolio: UTI Mastergrowth's mandate allows the scheme the option to invest up to 50 per cent of its assets in public sector stocks. At the end of January 2006, the fund had invested 35 per cent of its net assets in PSU stocks. Public sector banks accounted for 10 per cent of net assets while the oil sector (ONGC and Indian Oil) accounted for nearly 9 per cent of net assets. UTI Mastergrowth is a small fund with net assets of about Rs 300 crore.

The portfolio was well-diversified in sectors but concentrated in terms of stocks. None of the sectors accounted for more than 10 per cent of assets. In terms of stocks, though, the top ten stocks accounted for 45 per cent of the assets. There were also only 34 stocks in the portfolio. Large-cap funds tend to be less diversified and UTI Mastergrowth has a significant large-cap bias, which may be helpful, given the rich valuation levels.

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