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UTI Corporate Bond Fund is positioned as an accrual-oriented income fund

UTI Corporate Bond Fund is positioned as an accrual-oriented income fund 1
UTI Value Opportunities Fund

UTI Corporate Bond Fund is positioned as an accrual-oriented income fund to capture the yield movement at the shorter end (1 to 4 year segment) of the curve. The fund predominantly invests in high quality corporate bonds such that minimum 80% of portfolio is invested in AAA and AA+ rated corporate bond and equivalent instruments with an aim to provide reasonable income through accrual strategy. This fund follows conservative approach in security selection and has currently invested 100% of the portfolio in AAA rated securities issued by Public Sector Undertakings, Public Financial Institutions and Corporates with strong parentage & proven track record with various maturities. The fund’s average maturity generally ranges from 3.5 to 4.5 years.

In the recent monetary policy, as was widely expected, the MPC voted unanimously to continue accommodative stance and maintain the repo rate at 4.00%. The bond markets were expecting a status quo on rates and stance but had built in high expectations from the RBI Monetary Policy in announcing some specific measures to address concerns around a smooth conduct of the GOI borrowing. While RBI broadly met most of the expectations, it appears that the lack of specifics around OMO’s (Open-Market Operations) resulted in uptick in yields during the policy announcement. RBI’s statement on conducting the borrowings in non-disruptive manner and maintaining adequate liquidity would support the yields. The projection of inflation for Q3 FY22 are lowered to 4.3%, the inflation prints for months ahead and its impact on yields would be keenly tracked by the market participants as post the budget announcement market participants were expecting uptick in inflation. Further, on liquidity front, the Governor assured that the central bank would continually support the economy’s recovery from the pandemic by ensuring ample liquidity in the system this would provide support to yields at the short end of the curve. In such a scenario, a conservative investor may look at UTI Corporate Bond Fund to earn accrual income with reduced volatility in returns with an investment horizon of more than 12 months.

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