IT fund returns up on Infosys Q2 show

Information technology sector funds posted the best average return of 4.53 per cent for the week to Wednesday. This was on the back of a surge in shares of Infosys Technologies, after its stellar performance for the September quarter. On Wednesday, Infosys shares surged 3.95 per cent.

Beating market expectations, Infosys Technologies Wednesday reported July-September net profit of Rs 9.30 billion, up 53 per cent on year. Revenue was at Rs 34.51 billion, up 51 per cent from the year-ago period.

The software bellwether also raised its annual earning per share guidance to Rs 66 and forecast revenue of Rs 138.53-138.99 billion.

The impressive results of Infosys led to upbeat sentiment for IT stocks, with most of them posting gains. On Wednesday, BSE IT Index ended nearly 3 per cent up.

The rally in IT shares raised the net asset values of technology sector funds, and in turn improved their returns.

However, these funds underperformed BSE IT Index and CNX IT Index, which ended 6.64 per cent and 5.84 per cent up for the week to Wednesday.

Franklin Infotech from Franklin Templeton Mutual Fund was the best performer notching up 6.15 per cent return, followed by UTI Software with 5.5 per cent return.

Franklin Templeton Mutual Fund, in its September-end fact-sheet said, "Though recent earnings numbers have been influenced by one-off factors such as currency gains, we see strong and sustainable business momentum for the IT majors as larger deals get unbundled and offshored to India."

Franklin Infotech has a portfolio heavily tilted in favour of Infosys, with nearly 42 per cent of its corpus being deployed in the stock. According to Franklin Mutual Fund, the slowdown in US economy would result in the possibility of a fall in IT spend by major companies.

The fund house said, "However, the trend could work in favour of Indian IT vendors, as a focus on costs could prompt companies to examine offshoring a larger proportion of their work."

The mutual fund feels valuations in the sector have factored in fairly high earnings expectations and "this may call for a more selective approach going forward."

The September-end portfolios of technology funds reflect that Infosys featured as the top holding in all schemes, except Pru-ICICI Technology Fund.

Pru-ICICI Mutual Fund had the highest exposure to Deccan Chronicle (14.7 per cent of the assets) followed by Infosys (8.7 per cent).