UTI Opportunities Fund: Large-caps provide safe harbour

If you are looking for relatively safe bets in this volatile market, UTI Opportunities Fund seems a good choice. The fund’s predominantly large-cap focus should shield it better from sharp market downturns than other multi-cap funds.

About 88 per cent of the fund’s portfolio is currently in large-cap stocks (market cap in excess of ₹10,000 crore) that should hold out better if the market turns choppy. In the past too, the fund has placed most of its bets (in excess of 80 per cent) on large stocks. This helped it contain downside much better than the benchmark BSE 100 in previous deep downturns in 2009, 2011 and 2013.

In the weakness from January 2015 though, the fall in UTI Opportunities has been more than that in the benchmark BSE 100.

That’s because in this year’s vacillating market conditions, larger stocks have taken a heavier beating than their smaller counterparts. So, while the Sensex is down about 9 per cent from January end, the BSE 100 has fallen about 8 per cent while the BSE mid-cap index is up nearly 3.5 per cent. This has also reflected in the performance of UTI Opportunities that has underperformed over the past year. This seems to be because the commodity sector has larger weight in the large-cap universe than in the mid and small-cap universe.

But what seems to be a weakness can turn into the fund’s strength if the market sentiment dips sharply. From here on, a deep cut in the market may harm large-caps less than their smaller counterparts.

Besides, despite the near-term underperformance, UTI Opportunities’ long-term track record inspires confidence.

On an annual rolling return basis, the fund has outperformed the benchmark nearly 82 per cent of the time over the past five years. Its five-year annualised return has been ahead of the benchmark’s nearly 5 percentage points. The fund may not be a chartbuster in short periods, especially during solid bull runs, but steady performance across cycles has seen it deliver a solid 16 per cent plus annualised return over the 10 years since its inception in 2005.

This return is higher than the category average of large-cap funds and multi-cap funds. UTI Opportunities has been good at spotting winners and also cutting its losses early.

For instance, over the past year, it steadily raised stake in HDFC Bank and pared holdings sharply in Vedanta.

Over the past three and five years, stocks such as MRF and Sun Pharma have grown manifold in value. The few mid-caps have also been well-chosen with stocks such as Hexaware Technologies being multi-baggers.

A large portfolio in excess of 50 stocks with stakes less than 5 per cent in most reduces risk. Private sector banks account for a chunk of its holdings.