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Ideal Time to Shift to Accrual Oriented Funds

In Business
March 18, 2019

At a time when scope for further rate cuts is limited, investors are looking towards short term income funds to gain from high accrual coupled with income stability due to lower duration.

One such fund is UTI Short Term Income Fund which aims to generate reasonable returns with low risk and high liquidity from a portfolio of money market securities and high quality of debt with a average maturity cap of 4 years. The fund attaches importance to high credit quality and portfolio diversification.

Sudhir Agrawal, fund manager of UTI Short Term Income Fund says, “After 25 bps cut in policy rate by RBI in February, there is further scope for 25-50 bps rate cuts in next 3-6 months. However, we may not see a deeper rate cut cycle due to expectations of uptick in the CPI inflation towards end of this year. Also, due to RBI’s commitment to keep the system liquidity at neutral, we expect yield curve to see a steepening bias going forward. Hence, investors should continue investing in short term income funds as these funds offer high accrual along with lower volatility. We have been recommending investors to look at our short term income fund with an investment horizon of 1 to 3 years. Apart from the high accrual income in this fund, investors can look to gain from capital appreciation also due to supportive rate environment in next 3-6 months.”

UTI Short Term Income Fund has been consistently outperforming its benchmark CRISIL Short-Term Bond Fund Index. Fund has given a return of 8.51% against its benchmark return of 7.69% since inception(as on February 28, 2019).