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UTI Petro

With active churning of the portfolio aided by a small corpus around the petroleum theme, returns have flown thick and fast from UTI Petro in a bearish market

With active churning of the portfolio aided by a small corpus, returns have flown thick and fast from UTI Petro in a bearish market. With the petrochemical theme, UTI Petro has built a concentrated portfolio.

In a short period, UTI Petro has put up an impressive performance despite a bear grip on the bourses since early 2000. With an annualised return of 27.02 per cent since launch, the numbers are especially inspiring since most UTI equity funds have been sustained under-performers. Apart from investments in government controlled refining and distribution majors; the fund has had a penchant for both Reliance Petroleum and Reliance Industries.

Further, the fund manager has followed an aggressive investment strategy. For the year ended June 30, 2000, UTI Petro had a portfolio turnover of 841.53 per cent, which means that the average holding period for a stock is only 43 days! While investing 90 per cent of the assets in oil companies, UTI Petro has the leeway to invest its remaining assets in other sectors. The fund has utilised this mandate to primarily buy into technology counters.

In a period otherwise marked by steep losses for equity funds, UTI Petro is a top performer with a one-year return of 30 per cent. Yet, like all sectoral plays, UTI Petro has been a volatile fund since its performance depends on the vagaries of a single sector. With a size of only Rs 22 crore, the fund is yet to acquire a critical mass.

While investors should refrain from making a short-term commitment, the petrochemical sector is a promising investment for the long-term with divestment of public sector oil companies, expected consolidation and dismantling of administered price mechanism. UTI Petro can be considered as an addition to a well-diversified portfolio.