The Hindu Business Line : Tech funds lag benchmark

THOUGH technology stocks were back in favour at the bourses, technology funds have been sluggish in posting similar returns. The one-year return on technology sector funds is 28.57 per cent on an average. The technology index on BSE has posted over 42 per cent return since January 2004.

The two and three year returns of these funds are 38 per cent and 26 per cent respectively.

Comparatively, diversified equity funds have posted returns of 30.21 per cent for the year. They have also reported returns of 59.84 and 41.58 per cent for the last two and three years, respectively.

Market participants attribute this to the fact that the current bull run in the bourses is more broad based. There is no one significant sector that has completely outperformed others in this year's rally. Diversified equity funds have, therefore, managed to post impressive returns compared to sector funds, say fund managers.

Currently, Infosys accounts for 39.83 per cent of BSE's technology index, BSETECk. This is followed by TCS at 11.41 per cent, Satyam at 10.48 per cent and Wipro at 9.33 per cent.

Portfolios of most technology funds are skewed toward Infosys, though in slightly lower percentages than that of the index.

Kotak Tech, with 43.26 per cent of its assets allocated to Infosys, is the exception. Franklin Infotech has 35.62 per cent of its assets in the stock of Infosys, Magnum IT has 27.50 per cent and UTI Software 21.8 per cent, according to data from Value Research.

Distributors say that sector funds in general are not in the top tier of investment decisions of most investors. Mostly people who work in IT companies or people who are tracking the sector very closely, proactively seek to invest in these funds, said a distributor.

With the equity markets moving up without any major blips, distributors foresee the demand for equity funds also following a similar trajectory.

"Once investors have diversified their portfolios, they may seek to invest in one or two specific sector funds. If the market rally holds up, we could see an increase in inflows to these funds," said a Mumbai-based retail distributor.

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