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K. Venkatasubramanian

Investors can retain the units of DSPBR Technology.com Fund (DSP Technology), in light of its track record of delivering steady returns over the long term. The fund has outperformed its benchmark BSE TECk, over one-, three- and five-year periods. DSP Technology has generated a compounded annual return of 25.3 per cent over a five-year period, making it the best performing fund within the technology theme.

The fund delivers fairly strong returns compared to its benchmark during market upswings, even if some of the underlying sectors don’t perform as well, by picking the right stocks.

DSP Technology invests in a variety of sectors under the technology theme. These include software, hardware, telecom, educational services and media and entertainment, giving the fund a somewhat diversified look. The fund may be suitable for investors with a penchant for risk, as a diversifier, but not for a core portfolio.

Performance and Strategy: DSP Technology delivers superior returns during periods of market upswing. In the rallies of 2006, 2007 and in the recent one that started in March 2009, the fund has bettered its benchmark by substantial margins. But during periods when the market corrects substantially (say 25 per cent or more), as it did in 2004 and 2006 and by close to 60 per cent in 2008-09, the fund has declined more than the BSE TECk index.

This despite the fact that the fund, on an average, invested only 80 per cent of its portfolio in equity, and a bulk of it in what was considered a defensive bet – IT software.

Even its recent portfolio indicates that the fund is invested in equity to the tune of less than 90 per cent. The rest being parked in a combination of cash, derivatives and CBLOs.

Software has been the top sector held in the portfolio, to the extent of 60 per cent or more. Though not strictly comparable, funds such as Franklin Infotech and ICICI Pru Technology take heavy exposures to large-cap software stocks such as Infosys Technlogies, TCS and Wipro. But DSP Technology takes exposures across mid- and small-cap IT stocks, many of which have been multi-baggers in the recent rally.

Exposures to other sectors such as telecom, media, and hardware tend to be typically less than 10 percent of the overall portfolio. But this diversified nature within the technology space and some good stock picks have meant that spectacular returns delivered by a few stocks propped up overall fund performance.

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