The Hindu Business Line : Tech funds make a comeback

IN a turnabout that few would have expected, sector funds dedicated to IT stocks have emerged as the best performing class of equity funds for the past year. IT sector funds have delivered returns of between 49 and 62 per cent over the year.

In contrast, the average diversified equity fund, which spreads its investments across sectors, has managed a return of 27 per cent. IT stocks have been sharply re-rated on the bourses over the past year. The CNX IT index has appreciated by 53 per cent in value since last September. It has left the CNX Nifty far behind with returns of only 18 per cent.

Until the end of 2003, IT-sector funds were easily trounced by their more diversified peers; prompting many of them to re-invent themselves as diversified funds to improve performance. Many fund houses now find that their IT sector funds have fared better than their diversified offerings over the past year. For instance, DSP ML's Technology.com fund has seen its net asset value zoom 62 per cent over the past year, while its diversified funds - DSP Equity and Top 100 Fund - have managed returns of about 40 per cent.

Franklin Infotech Fund now boasts a one-year return of 59 per cent, faring much better than diversified funds - Franklin Prima Plus and Franklin Bluechip Fund (both at 42 per cent). The 50 per cent appreciation in K-Tech- Kotak Mutual's IT sector fund, puts it ahead of K-30 - a diversified fund, which has returned 47 per cent. Funds such as the Birla India Opportunities Fund and Franklin India Opportunities Fund, which were originally IT-sector funds but were re-christened as diversified funds last year, have fared well with returns of 43-45 per cent; but have not matched the returns of IT-sector funds.

Equity funds with a focus on mid-cap stocks (such as HDFC Tax Plan 2000 and Franklin Prima) and those with a technology bias (such as HSBC Equity) have been the top performers among the diversified equity funds for a one-year period.

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