Despite depressed market conditions in the past few months, Chennai-based Kothari Pioneer Mutual Fund (KPMF) today disclosed that it has made substantial purchases in select information technology (IT) stocks, thus making it a 'net buyer' in IT sector during last two months.
Sukumar Rajah, vice-president and fund manager, Kothari Pioneer, said, "At today's prices, there is lot of value in select IT stocks whose fundamentals are quite strong. At the same time we have not gone overboard on IT sector as we are not bullish on all companies."
But, as a percentage of total assets, the share of IT sector has actually shrunk to around 15 per cent from 30-40 per cent in April 2000. "The share of IT sector in the total assets has fallen mainly because of the decline in the value of shares even though the absolute number of shares in that sector has increased," he explained.
KPMF has identified-Infosys Technologies, Hughes Software, Wipro and HCL Technologies as those possessing good fundamentals and exhibit strong future growth potential. In both -- Internet Opportunities Fund and Infotech Fund, the shares of these four company occupy the top holdings.
Citing deterioration in fundamentals, exposure to Satyam, NIIT, and MTNL has been reduced in the above funds and added Wipro, Digital Equipment and Aztec Software. Explaining the rationale for reduced exposure to Satyam Computer, Sukumar said, "Satyam's free cash flow (FCF) per unit of revenue is lower when compared with Infosys because of low margins and also the quality of work." The company's accounting policy and high employee turnover was also cited as reasons.
