With the flexibility to take advantage of the yield movement at the shorter end (1 to 3-year segment) of the curve, UTI Short Term Income Fund is primarily an accrual-oriented income fund. The fund predominantly invests in high-quality CDs, CPs and corporate bonds with tactical exposure to sovereign instruments like G-Secs, SDLs, etc. to actively manage duration. The fund manager takes tactical exposure to G-Secs based on evolving market conditions and/or economic outlook, according to UTI sources.
In the past quarter, the uptick in economic growth indicates the success of monetary easing and fiscal stimulus seen in past few months. The inflation might see moderate in coming months primarily on back of softening of food inflation and favourable base effect. However, from a medium term perspective the impact of increasing crude oil and commodity prices might be seen on inflation. On rate front, the probability of RBI changing its accommodative stance anytime soon is very low. However, RBI may not be too aggressive in cutting rates as well.
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, investors may look at UTI Short Term Income Fund as a part of the core fixed income portfolio from an investment horizon for 12 months and above.
