UTI Innovation Fund: Long term Investment in Future Opportunities

The UTI Innovation Fund was launched in October 2023 and has completed a little over 2 years. The fund follows an investment strategy based on Innovation, Growth and Quality. Innovation as an investment theme has the potential to outperform the broad market. In the last 10 years NASDAQ 100 (which comprises of companies high on innovation) gave 19.5% return, versus the S&P 500's (index of 500 large cap stocks in the US) 13.7% return over the same period. In this article we will discuss about the innovation theme and review UTI Innovations Fund.

Meaning and Scope of innovation

Innovation is the ability to create new products/ ideas, services, processes or improving on some existing models Innovation has shaped the progress of human civilization since the earliest days. From the discovery of fire to the invention of wheels, the use of metals, the industrial revolution and computers, innovation has been the bedrock of technological advancement. Any technological advancements, development of new and improved ideas, products and services are all indicative of innovation.

What is innovation-based thematic investing?

The scope of innovation is all pervasive, driving across a wide spectrum of areas – from financial services and business processes to consumer markets. Today's competitive landscape heavily relies on innovation. Businesses that make innovation an integral part of their processes, can enhance their market share, increase their productivity, revenues and profits. Investing in Innovation theme, refers to a focus on companies that use innovative and disruptive solutions to create new markets. This increases market share or enlarges an existing market. Investing in Innovation as a theme has the scope to touch all types of companies and benefit from them. Investment in innovation theme is gaining increasing popularity with global retail and institutional investors over the past few years.

Why should you invest in the Innovation theme?

• Innovation is a diversified investment theme
  
  

  Many investors only associate technology with innovation. The Nifty 500 comprises of the most innovative listed companies in India. If you look at the sector composition of the Nifty 500, which is also the benchmark of the UTI Innovation Fund, you will see that companies in India, have benefitted from innovations across different industry sectors: innovators were spread across different sectors like tech, consumer discretionary, healthcare, telecom, industrials, consumer staples etc.

  
  

  



• India is at an Inflection point of Innovation
  
  

  India is on the cusp of a ground breaking innovation era, driven by its thriving start up ecosystem, cutting-edge technologies like AI and fintech, and favourable government policies. With a young, dynamic workforce and increasing global investments, innovations across sectors like healthcare, renewable energy, and digital infrastructure are flourishing.

Government support for innovation

1. 10,000 Atal Tinkering Labs (ATL). 1.1 crores+ students actively engaged in ATLs.


2. 72 Atal Incubation Centres. 32,000 jobs created.


3. 3,500+ startups supported. 1,000+ women led startups.


4. 6,200+ mentors of change.


5. 14 Atal Community Innovation Centres.


6. 24 Atal New India challenges.


7. 40+ domestic and international partnerships.

Source: https://aim.gov.in/.

Opportunities in the Innovation theme

E-Commerce penetration in India in 2023 was just 7% much lower than US and China. This translates to a long runway for growth across sectors.

Sources: Euromonitor, Kotak Research.

• Success story examples of innovations / innovators in India
  
  

  



• Trends in innovation and how it affects industries / businesses
  
  

  



• Fintech: A large set of Fintech start-ups are ready to disrupt the mammoth traditional banking and financial services industry. Pivoting from digital payments, startups are now targeting several sub-segments of financial industry.
  
  

  



• Food tech: Large addressable market and industry structure: Unit economics have improved significantly with operations expanding into grocery delivery
  
  

  



• SaaS/Deep Tech: Real innovation happening in India: Against global layoffs in 2022, 96% of Indian SaaS unicorns & soonicorns increased headcount. India already has 21 SaaS unicorns Fintech. Deep Tech companies are still in early stage as use cases are evolving.
  
  

  



• Generative AI: Startups in India doubled from 25 in 2021 to more than 55 in 2022. The cumulative funding also saw a major thrust from $157 million to more than $566 million in 2022 and $662 million by February 2024. 79% of Indian start-ups are building Generative AI solutions inhouse.


• Digital Advertising: There exists a long runway for growth in this sector with growing penetration of connected devices, and rapid digitization of existing and new industry verticals.
  
  

  

  
  

  Sources: Redseer, Dentsu I E4M, Statista – FY2024



• Healthcare: Pace of digitization is expected to increase in India
  
  

  



• Global chemicals supply chains shifting to India: India is expected to become a $850-1000 bn. Chemical market by 2040, taking 10-12% share of the global chemical market


• Climate focus: India's energy needs were predominantly based on coal. A significant scale up in renewable sources of energy is expected by 2030
  
  

  

UTI Innovations Fund

The UTI Innovation Fund is an open-ended equity scheme following the innovation theme. The scheme intends to provide medium to long-term capital appreciation through investment primarily in growth and innovation-oriented equity and equity-related instruments. The fund is managed by Mr. Nitin Jain. The benchmark of the fund is Nifty 500 TRI.

Investment Philosophy of the UTI Innovation Fund

The UTI Innovation Fund follows an investment strategy based on Innovation, Growth and Quality. The philosophy of the Fund is to invest in companies that are innovators, disruptors in the space they operate in and can demonstrate significantly high growth in their respective sectors. The scheme uses a bottom-up approach for stock selection with a preference for innovation-oriented opportunities that are self-sustaining and have long runway for growth. The companies are primarily present in the space of emerging technologies, food tech, e-commerce, clean technologies, gaming, SAAS, e-healthcare, automation and R&D ancillaries. While some of the companies may not be profitable today but are expected to move towards profitability in the future and hence become high RoCE businesses. Many of the new-age companies have already demonstrated profitability.

Innovation

• Ahead of the curve in investing in digital & technology


• Ahead of the peers


• Process innovation driving cost curve down


• Focus on clean technologies

Growth

• Companies with long runway of growth


• Companies that have demonstrated track record of gaining market share


• Topline Growth higher than peers

Quality

• Market Leaders in their respective domain


• Positive unit economics. Path to high RoCEs and Cashflow generation


• Significant entry barriers and network effects
  
  

  

Current Portfolio construct

Source: Fund Factsheet, Data as on 31^st Dec 2025

Why should you invest in the UTI Innovation Fund

Who should invest in the UTI Innovation Fund?

The fund is suitable for investors who are:

1. Well informed and experienced.


2. Want specialized exposure to disruptive and innovative companies.


3. Want to participate in India's growth story.


4. Wish to diversify their portfolio.


5. Have a very high-risk appetite.

Consult your financial advisor or a mutual fund distributor to find out how the UTI Innovation fund can be suitable for your portfolio.