In the dynamic world of equity investing, the UTI Nifty200 Quality 30 Index Fund stands out as an attractive choice for those looking to align their portfolios with leading market indices. This NFO was launched on September 2, 2024 and is an innovative open-ended index fund that aims to replicate the performance of the Nifty200 Quality 30 TRI, giving investors a chance to tap into the potential returns of high-quality stocks.
By focusing on closely tracking the index’s total return, the fund offers a simple yet effective approach to gaining exposure to quality equity investments.
Let’s delve into the features, benefits, and essential details of this fund, and see how it might fit into your investment strategy.
About the UTI Nifty200 Quality 30 Index Fund NFO
The UTI Nifty200 Quality 30 Index Fund is classified as an open-ended equity index fund and seeks to provide returns that closely correspond to the total return of the underlying index, the Nifty200 Quality 30 TRI, before any fees or expenses may apply. Investors should keep in mind that–though the fund seeks to achieve the mentioned objective, there is no assurance or guarantee that it will do so.
UTI Nifty200 Quality 30 Index Fund NFO provides daily liquidity, enabling investors to buy or sell units at the applicable NAV on any business day.
Glance at the details of this NFO:
Data updated as of 26.08.24
About UTI Mutual Fund
The UTI Asset Management Company Limited (UTI AMC) is known to be among India’s oldest and leading Mutual Fund companies with a legacy that dates back to 1964. It was the establishment of the Unit Trust of India (UTI) under an Act of Parliament, making it the first Mutual Fund in the country. Under the Reserve Bank of India (RBI), UTI played a fundamental role in promoting public savings and long term financing for India’s industrial sector. Its flagship product, the Unit Scheme 1964 (US-64), was immensely popular due to its attractive return to capital.
Subsequent to this, UTI gained dominance and held over 80% share in the Indian Mutual Fund Industry by the 1990s. UTI went through several challenges and it’s inability to honour the regular withdrawal under the US-64 scheme, resulted in substantial financial losses and a major restructuring in 2003. The restructuring saw UTI split into UTI Mutual Fund, present day UTI Mutual Fund AMC, and the Specified Undertaking of UTI (SUUTI).
Upon re-compilation, UTI AMC has changed to a professionally managed organization, diversified product offerings and became one of the largest asset management firms in India. In October 2020, UTI AMC became a publicly traded company, in the continuation of a long and impactful life.
Understanding the Benchmark Index
The objective of UTI Nifty200 Quality 30 Index Fund is to measure the scheme’s performance against the Nifty200 Quality 30 TRI index, which is based on the idea that the scheme will passively replicate the portfolio of the Nifty200 Quality 30 Index.
This index directly monitors the performance of relevant sectors and carries the potential to generate awe-strucking returns. Though in the world of investments, volatility eyes every benchmark index’s performance, as well as the performance of the scheme.
Take a look at the benchmark’s performance over the years to understand how it might affect the fund’s performance:
Data updated as of 30.08.24
Portfolio Allocation Strategy
The investment objective of the UTI Nifty200 Quality 30 Index Fund NFO is to replicate the performance of the Nifty200 Quality 30 Index. This index has selected the top 30 companies from the Nifty 200 Index on the basis of quality.
This is subsequently measured with regard to three factors: ROE (return on equity), which relates to the profitability of the company from investment; Financial Leverage, being the ratio between debt and equity; and Stability of Earnings Per Share, reflecting how well growth in the earnings of the company has been over a five-year period. UTI Nifty200 Quality 30 Index Fund selects companies based on these quality scores, but it takes into consideration the size of each company in the market. The weight of every company in the fund is a function of its quality score coupled with the size of its free float market capitalization, although no single stock can make up more than 5% of the fund.
The industries are well spread out with major investments in Information Technology (30%), Fast Moving Consumer Goods (28%), and Consumer Durables (9%). The fund is reviewed half-yearly with the purpose of maintaining quality standards and continuing with the current market direction.
Risk Profile
UTI Nifty200 Quality 30 Index Fund offers access to good quality shares but also carries some risks such as market risk, investment risk due to over-exposure to a few companies and risk of tracking error at different levels. If the market is investing in growth or speculative stocks, there will likely be drawbacks in that there will likely be relative underperformance compared to those sectors as well as risks associated with concentration of exposure in narrow sectors.
In any case, UTI Nifty200 Quality 30 Index Fund carries a moderate to high risk and those investors who are looking for good quality stocks with lower risks compared to that of the overall equity funds will find this scheme quite appealing
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Ideal Investors for the NFO
The UTI Nifty200 Quality 30 Index Fund is a solid choice for long-term investors looking for a very high-risk and passive investment approach. If you’re ready to stick with quality stocks with strong fundamentals and are comfortable with the movement of a large index fund, the UTI index fund is great. It’s the best choice if you value all the simplicity that index investing provides and would like to obtain quality firms that you could, at the same time, differentiate your portfolio from the top. With daily planning ease of excess index liquidity and its starting universe of high-quality securities, you’ll receive transparency and very clear investment options.
