UTI Ultra Short Term Fund.

UTI Ultra Short Term Fund is an accrual-oriented income fund with a diversified portfolio of debt and money market instruments which aims to generate reasonable income. The fund is well positioned to capture yield movement at the shorter end of the curve by maintaining a portfolio duration of 3 to 6 months along with a high degree of liquidity.

RBI Governor has decided to increase the quantum under the VRRR to ₹ 4 lac crores in a phased manner from August 13th onwards. The system liquidity is in surplus mode to the tune of approximately ₹ 8 lac crores so the increase in VRRR may still leave sufficient liquidity in the banking system. However, the announcement of increase in VRRR indicates the continuation of normalization process which was halted due to second wave of Covid. The liquidity normalization process is expected to be a gradual and in phased manner. It is expected that RBI would start the normalization process in next 4-6 months by increasing the reverse repo rate if growth pickups substantially and there is no onset of 3rd wave of Covid.

In such a scenario where there is ample liquidity in system, the shorter end of curve (i.e. 1 to 2 years part of the curve) is well supported and provides a good opportunity to invest in UTI Ultra Short Term Fund for short horizon of 3 to 6 months.