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Information technology equity funds buck market trend

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Chandan Kishore Kant Mumbai
Last Updated : Jan 21 2013 | 1:22 AM IST

Give 10 per cent returns in the past 3 months, at a time when other funds bleed.

At a time when all equity mutual fund (MF) schemes are making considerable losses, information technology (IT) has brought some relief for investors. In the past three months, equity schemes having investment in IT have bucked the trend.



At a time when investors are losing confidence and flows in equity funds have deteriorated, IT funds have offered an average return of 10 per cent. During this period, stock markets’ benchmark indices have seen a six per cent erosion in their values. And, IT indices have risen 13 per cent.



More, technology equity schemes have topped the list among all categories since September. Even returns in fast moving consumer goods, pharmaceutical schemes and gold funds, so far seen as better bets, could not be in positive territory. The best performing technology scheme has given returns of as high as 14.5 per cent.

According to the chief investment officer (CIO) of a public sector bank-sponsored asset management company, the strength shown by top IT firms in terms of stock price movement in the past couple of months after being beaten down to very cheap valuations has helped IT schemes outperform the other asset categories.

Currently, there are five technology funds available to investors — SBI MF’s Magnum IT, ICICI Prudential Technology, DSP BlackRock Technology, Franklin InfoTech and Birla Sun Life New Millennium. All these funds were launched in the late 90s, around the IT boom.

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The head of equities at a foreign fund house says, “The major reason for out-performance is the high weightage of those counters which performed exceptionally well.” Infosys, Tata Consultancy Services (TCS) and Wipro collectively make up 65-75 per cent of the portfolio of IT schemes. Shares of all these majors gained between 13 and 20 per cent.

“When shares of Infosys neared the Rs 2,000-mark and TCS slipped into three-digits, it made sense to take a buy call on these counters. And, it worked,” explains the CIO cited earlier.

He added that the sharp depreciation in the rupee against the dollar would bring net positive impact on the industry, despite concerns on slowdown in the current quarter. Fund managers chose to keep their cash levels low in these schemes. For instance, as on November 30, ICICI Prudential Technology kept 98 per cent of its assets invested in equities, while DSP BlackRock Technology kept its cash holding at around three per cent.

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First Published: Dec 16 2011 | 12:04 AM IST

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