UTI Treasury Advantage Fund follows an accrual-oriented strategy by investing in a well-diversified portfolio of debt and money market instruments with an aim to generate reasonable income with lower volatility over the short-term. The fund primarily invests in commercial papers, certificate of deposits and low duration corporate bonds along with tactical exposure to government securities.
There has been an uptick in economic growth in the past quarter which indicates the success of monetary easing and fiscal stimulus seen in past few months. Inflation is expected to moderate in coming months primarily on back of softening of food inflation and favourable base effect. Going forward the market participants would be watchful for an uptick in inflation due to improvement in domestic consumption and rising crude oil prices. On rate front, the rate cycle seems to have bottomed out and there might not be aggressive rate cuts by RBI. The possibility of RBI changing its accommodative stance anytime soon is very low. Currently, the liquidity is in surplus mode with system liquidity in excess of Rs. 6 lakh crores. The liquidity in the system is likely to remain in surplus mode as it is expected that RBI will support liquidity in the system in form of Open Market Operations (OMOs). Further, the market participants would keenly track the government borrowing and fiscal deficit estimates in the upcoming budget.
It is expected that from here on short term rates would stay range bound and not steepen further in the near future. In such a scenario, UTI Treasury Advantage Fund provides a good investment opportunity to park for short horizon of 6 to 12 months.