Looking for relatively safer bets but still want to participate in the ongoing market rally? Go for UTI Equity Fund, a large-cap oriented fund which has shown its mettle across most market cycles. With a marked improvement in performance over the past few years, the fund has figured in the top two quartiles of large-cap funds across time periods and trumped its benchmark BSE 100 convincingly by 6-15 percentage points. Its annual rolling return over the last five years has been better than that of its benchmark nearly 90 per cent of the time, attesting to the fund’s consistent out-performance.

Not only has UTI Equity Fund done very well in most bull markets over the past five years (except during the recovery of 2010), but it has also contained downsides effectively when the tide turned. This was visible during the market reversals of 2009, 2011 and 2013. This ability to contain losses better than the benchmark will come handy if the market corrects from current levels.

UTI Equity Fund’s stability stems from the fact that its portfolio is dominated by less volatile large-cap stocks (consistently more than 85 per cent of the corpus).

Healthy blend That said, the sprinkling of mid and small-caps in UTI Equity’s portfolio has helped it put up a solid show when the market is on a roll. For instance, stocks such as KEC and SML ISUZU, which have tripled to quintupled over the past year, buoyed the fund’s one-year returns to more than 53 per cent. Not just that, smart sector rotation by reducing exposure to defensives such as pharma and increasing stakes in cyclicals such as banks and autos (which have led the recent rally) has stood UTI Fund in good stead. Well-timed exits from losing stocks such as Jindal Steel and Power and Cairn India also helped. Over the past three- and five-year periods, the addition of multi-baggers such as Eicher Motors, Titan Company and Tech Mahindra has bolstered returns.

True to its relatively conservative nature, UTI Equity Fund prefers to sit on cash when it perceives volatility in the market. So, even in April and May this year, in the run-up to the election, the fund held 5 per cent of its portfolio as cash. But this has reduced sharply since, and now the fund is almost entirely invested in equity.

Currently, banks accounts for the largest chunk (23 per cent) in the fund’s portfolio. Most of this is in private banks. This exposure should translate into good returns if the economy revives as expected. The next big holding is in the defensive software sector which should benefit from improved economic conditions in the US.

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