UTI Nifty 50 Index Fund Completes 25 Years Amid Market Valuation Concerns, FPI Outflows

UTI Nifty 50 Index Fund has completed 25 years, crossing an asset under management (AUM) of over Rs 20,000 crore. Over the years, the fund has maintained relatively low tracking errors and tracking differences, reinforcing its position in passive investing, according to a press release from the fund house. However, while marking this milestone, market experts remain cautious about India’s equity valuations and the return of foreign investors.

At the bell-ringing ceremony, UTI Mutual Fund CIO Vetri M Subramaniam and Head of Equity Ajay Tyagi highlighted that Indian equities continue to trade at high valuations compared to historical trends and other emerging markets. Tyagi rejected the idea that changes in capital gains tax were behind the foreign portfolio investor (FPI) outflows, stating that investors had already begun pulling back since August-September due to weakening growth prospects and overvalued markets.

Since September, FPIs have withdrawn Rs 2.28 lakh crore ($26.5 billion) from Indian markets. Subramaniam noted that much of this capital is being redirected to U.S. assets, where bond yields stand at 4.5 per cent, making them a more attractive option. With the US currently accounting for over two-thirds of global indexes, it has become a popular destination for international investment.

When it comes to investment strategy, Tyagi stated that mid- and small-cap equities are pricey, but large-cap stocks provide substantially better value but are not very attractive. At this point he indicated that balanced advantage and multi-asset funds could be better investing options given the market situation.

According to the press release, the fund is suitable for those looking to participate in India's economic growth due to its disciplined approach, cost-effectiveness and broad market representation.