Ashok Kumar, theIPOguru, is a man of few words. So, when he speaks, investors and particularly those chasing the IPO Rainbow with
the proverbial 'pot of gold' at the end of it, listen carefully.
The Technology Funds have been out-performers in terms of last one year returns outperforming the benchmarks as well as the other sector focused schemes.
Mutual Fund Schemes
Asset
NAV
% Returns
Months
No. of Years
(Rs. cr.)
Rs.
3
6
1 yr
3 yr
5 yr
SBI Magnum IT Fund
58
20
16
41
162
-21
137
Franklin Infotech Fund
139
54
15
40
149
-5
121
ICICI Pru Tech. Fund
98
14
15
42
143
-13
129
DSP-BR Technology.Com
96
32
11
39
137
25
227
Birla SL New Millennium
67
19
10
29
111
-11
122
Kotak Tech
19
6
--
--
--
--
--
Index
3mth
6mth
1yr
3yr
5yr
Sensex
0.4
14
91
19
176
Nifty
1
15
86
23
164
BSE IT
17
43
146
-3
118
As the name suggests, the fortune of these schemes is interlinked with the IT sector performance, which until recently had been an underperformer at the bourses. Strong results emanating from increased spending in the US markets and the Banking, Finance, Service and Insurance (BFSI) vertical has seen the stock price of IT majors like Infosys, TCS and Wipro rising sharply.
The change in sentiment was more pronounced at the IT Mid-Cap Counters like 3i- Infotech against the backdrop of better business prospects.
So, are thes sectoral schemes, back in flavour,or is the run up a good time to exit ?
Review of IT Focussed Schemes :
SBI Magnum IT Fund : Book Profits
The top three holdings comprise Infosys Technologies Limited at 27.20%, Tata Consultancy Services Ltd. at 20.78% and Infotech Enterprises Limited at 12.96%. While the scheme has a mix of large caps and small caps which augurs well, given the sharp run up in these stocks and resultantly in the NAV of the scheme, it maybe safer to book profits. Most of the positives seem to be discounted for now and they may, at best be market performers.
Franklin Infotech Fund : EXIT
A first look into the fact sheet makes one wonder, if they read the name of the scheme correctly, is it Franklin Infosys Fund ? As of December 31, 2009, the scheme has a staggering 57.54% exposure to a single stock – Infosys Technologies ! With margin increases stemming from cost controls the big trigger for this company lies in its huge reserves which can fund inorganic initiatives and result in the stock re-rating. TCS represents another 23% of the portfolio. Considering the over exposure to the two stocks, it is clear that this fund’s fortunes are directly linked to those of just these two stocks. In that case, why not buy these stocks directly and save on the multiple fees that a Fund levies on its unit holders.
It must be noted that despite good numbers and seemingly better prospects, the IT industry will be affected by the appreciating Rupee against the Dollar resultantly impacting its top-line growth. Margin expansion based on cost cutting may not be sustainable and volumes growth will be the key hereon.
This hold true all the more for the large caps which are focused on the US markets, to a great extent. In short, the risk-reward ratio is skewed heavily, towards the former for the above two schemes.
Investors may consider exiting the schemes for now.
