UTI Petro Fund

Dhirendra Kumar

Background
UTI Petro Fund was launched in June 1999 as a part of UTI Growth Sectors Fund umbrella. Upto 90 per cent of the fund is to be invested only in petroleum sector stocks -- oil and gas exploration, drilling, refining, petrochemicals, constructing and managing pipelines. The fund has not paid any dividend so far. While the entry into the fund is at NAV, there is an exit load of 2 per cent.

Performance
Despite a lackluster year for public sector oil majors, UTI Petro Fund has delivered a modest return of 11.43 per cent with a quality portfolio of oil stocks. The fund initially took off with concentrated holdings in PSU oil companies but as on June 30, 2000, Reliance Petroleum and Reliance Industries are the top two holdings with a combined weight of over 23 per cent. And both the stocks have gained sharply over the past one-year, with Reliance Industries up 84 per cent while Reliance Petroleum moving up by 60 per cent.

Almost 60 percent of the fund assets are invested in public sector oil and petrochemical companies. Apart from putting 90 per cent of the assets in oil companies, the fund manager for UTI Petro has the leeway of investing upto 10 per cent of the fund's assets in other sectors. The fund has used the flexibility in its allocation to invest in key information technology stocks – Infosys and Global Tele-Systems and pharmaceutical stock – Pfizer. This marginal flexibility has helped the fund to post a positive return in a turbulent market during the current year. For the seven months ended July 31, the fund has gained 17.68 per cent and ranks number two after UTI Services Sector in the Value Research’s Specialty Fund category. The fund has also been relative stable against a turbulent market of Infotech funds.

Outlook
UTI Petro Fund has managed to deliver reasonable returns till now. Given its charter and the complexion of the industry, the fund is largely invested in quality PSU stocks. The fund could be a significant beneficiary of the government's dis-investment process, which can boost valuation if strategic sale or restructuring takes place. Besides, some of the oil majors will also be a key beneficiary of free petroleum pricing. However, the wait could be long for these changes to occur. UTI Petro Fund holds good long-term gain potential.

Fund Basics
Objective	Size (Cr)	NAV:14/08/2000	Exit Price	Entry Price	Total Returns(%)
Sector	38.31	11.31	11.08	11.31	11.43%
Benchmark Comparisons (%)					31/7/2000
	1M	3M	6M	1Yr	3Yr
Fund	-4.5	3.6	20.9	—	—
Nifty Tot. Ret.	-11.4	-7.2	-15.0	0.5	3.5
Sensex	-9.8	-8.1	-17.7	-5.7	0.2
Obj. Avg.	-7.7	-5.0	-17.4	11.0	35.3
Top Holdings (30/6/2000)					Net assets (%)
Reliance Petroleum					11.96
Reliance Industries					11.13
ONGC					10.78
IBP Co					10.72
IOC					10.66
HPCL					10.58
IPCL					10.47
Infosys Technologies					8.69
Gas Authority					3.86
Global Tele-Systems					3.50
Chennai Petroleum Corpn					2.81
BPCL					1.91
Pfizer					1.79
MRPL					0.92

Source: Value Research

Fund File

Money

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