UTI Corporate Bond 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.

Recently, RBI Governor in his unscheduled meet announced some measures to support the economy on the backdrop Covid second wave.  These measures include second purchase of G-secs amounting to Rs. 35,000 crores under G-SAP 1.0 scheduled on May 20, 202, debt restructuring for borrowers (i.e.  MSMEs, small businesses, individuals etc.) with outstanding dues of Rs. 25 crores, special 3 yr LTRO for Small Finance Banks, On-tap term liquidity Facility of Rs. 50,000 crores for Covid related healthcare infrastructure companies etc. The G-SAP announcement was already priced-in by the market participants as most of them were expecting the RBI to conduct a G-SAP auction of Rs. 25,000 crores. However, RBI announced to conduct the auction for Rs. 35,000 crores which was taken positively by the market and yields of G-sec/corporate bonds rallied by 2 to 5 bps across maturities. Going ahead, yield movements are expected to be favourable in the near term in the light of current second wave.  It is expected that RBI is likely to continue to announce OMOs, Operation Twist in addition to G-SAP which would help boost market sentiment. Further, RBI has announced 14 day Variable Reverse Repo Rate (VRRR) auction instead of longer tenure VRRR. This announced coupled with surplus liquidity in the system would support the yields at the shorter end of the yield curve. This presents a good opportunity for a conservative investor to look at UTI Corporate Bond Fund for an investment horizon of more than 12 months.