UTI Top 100 Fund: Hold

Investors can consider retaining their units in UTI Top 100 Fund based on its ability to navigate the downsides better since its new avatar, post merger of a couple of schemes. The fund aims to invest 65 per cent of its assets in the top 100 companies and the rest in stocks with growth prospects.

Although the fund invests in midcap stocks, the average market cap of the fund is Rs 64,000 crore, suggesting that it focuses on large-caps and sports a less aggressive risk profile.

Investors with moderate risk profile can continue to stay invested in the fund.

The fund was launched in May 2009, by merging the erstwhile Index Select Fund and Master Growth Fund. Investors can hold the fund and avoid fresh exposure as the fund has a less than three-year track record since the merger.

Performance

The fund lost out on the first leg of the rally in 2009 as it was launched much later. It, nevertheless, bettered its benchmark BSE 100 by three percentage points since the merger in May 2009.

The fund appears in the top quartile of the one-year performance chart of large-cap funds with a 5 per cent return. It outpaced its benchmark by four percentage points, and also marginally edged past consistent performer Franklin Bluechip .

Investors who opted for a SIP route into the fund over the past two years are facing a loss of 8 per cent against lump sum return of 6.5 per cent for the same period.

The market experienced volatile phases in 2011. On a few occasions when Nifty corrected by 10 per cent and more, the fund contained losses better than the bellwether index.

With a lower beta (which means it is less volatile compared with its benchmark both on the upside and downside) the fund will suit conservative investors if markets continue to remain volatile.

For instance, in calendar year 2011, the fund lost 16 per cent against 25 per cent shed by Nifty.

It also has a lower portfolio turnover, suggesting that it prefers a hold approach.

In the last few months, the fund underperformed its benchmark mainly on account of its higher weight on FMCG compared with the BSE 100. Besides, the fund could not participate in the surprise market rally in January 2012 as it held 11 per cent of its assets in cash in end-December 2011.

Portfolio overview: The fund held 34 stocks in the portfolio and the top ten stocks accounted for 50 per cent of the assets.

The preferred three sectors of energy, consumer non-durables and financial services accounted for 54 per cent of the portfolio.

Interestingly, the fund invested 11 per cent of its assets in cement and cement products. This sector has seen a strong rally.

Similarly, despite the energy sector trailing, the fund had higher exposure to it.

In contrast, for more than two years, its exposure to pharma was less than 5 per cent. In the last one year, it pruned exposure to auto and capital goods.

The fund is managed by Ms Swati Kulkarni.

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