The Hindu Business Line : Tech funds fine, but trail BSETECk

THOUGH technology sector funds are showing resurgence in terms of investor interest and returns posted, they are still under performing the BSETECk index. On an average, technology sector funds have posted returns of 32.56 per cent for the last six months and 40.28 per cent for the past year.

While these are significantly high returns, the funds are struggling to keep up with the returns posted by the index against which they are measured. Sector average returns on technology funds are close to 10 per cent lower than BSETECk which posted 42.6 per cent for the last six months.

Asset management companies say that this is because the index is very highly skewed towards Infosys and Wipro. "If we replicate the weightages attributed to these two scrips in the index, our portfolio would become too risky," said a fund manager.

Currently, in BSETECk, Infosys constitutes 47.34 per cent of the index and Wipro takes up another 10.71 per cent. Satyam is the other heavyweight in the index, currently hogging 12.97 per cent of the weightage.

Individually, the share price of Infosys has gone up by 50 per cent, Wipro by 33 per cent and Satyam by 38 per cent, since June this year. These movements have buoyed the index.

Technology sector funds tend not to have exposures higher than 20 per cent of the funds corpus in any one scrip, say fund managers. "We also take a view on five to eight scrips which may not necessarily be in the index. We are more cautious about risks than the people who construct the index, hence the lower returns posted," said the fund manager of a software sector fund.

Currently, only about seven technology sector funds are operational. Post the technology meltdown, several asset management companies had modified their technology sector funds and recast them in various other forms. The most popular `new avatar' of tech sector funds were funds that could invest in sectors such as pharmaceutical, textile and other areas expected to perform once the quotas are abolished.

Distributors say the retail interest in these funds is also on the upsurge now. Technology sector funds are fashionable once again, and are being sold as `high return' investments with a horizon of over two years, said a financial advisor.

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