India Economy

Nasdaq-100 a better bet than CNX IT

Arvind Jayaram | Updated on November 16, 2017 Published on August 04, 2012

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When it comes to investment in the information technology sector, Indian investors nowadays are spoilt for choice. The introduction of the Nasdaq-100 exchange-traded fund (ETF) on the National Stock Exchange allows domestic punters to bet on the performance of the top 100 IT majors in the US, in addition to home-grown stalwarts such as Infosys and Wipro. And if index-linked investment is not your cup of tea, you always have the option of making direct purchases of overseas IT stocks that you favour.

Looking beyond domestic IT majors has reaped rich dividends for those investors that reposed their faith — and their money — in the performance of the US biggies in 2012, with the N-100 ETF rising by 19.1 per cent since the start of the year. This trumped returns from investment in Indian IT companies during the year. During the course of the year so far, the IT benchmark — the CNX-IT index — has fallen by 7.6 per cent.

This was also a better showing than the 15.6 per cent growth witnessed by the Nasdaq Composite — the benchmark index on the New York-based IT exchange — during the year.

US-listed IT stocks, a better option

Investors that had the foresight to invest in shares of US technology giants like Apple instead of indigenous heavyweights would also have made a killing. Apple’s stock has shot up by 50.8 per cent since the start of 2012, while companies such as Amazon and Oracle have seen share prices rise by 34.8 per cent and 17.7 per cent, respectively.

Of course, not all Nasdaq-listed IT firms were good picks: Cisco shed 11.8 per cent and Google lost 2 per cent during the course of 2012. Since its ill-fated IPO earlier this year, Facebook stock has lost half of its value.

But with industry stalwarts like Microsoft rising by 13.5 per cent, Qualcomm by 9.1 per cent and Intel by 6 per cent, it was clearly a better option to subscribe to US-listed IT stocks than Indian scrips in terms of average returns.

A mixed bag for Indian IT stocks

In comparison, the stock performance of Indian IT majors has been a mixed bag. IT bellwether Infosys has seen its shares tank by 19.8 per cent on the NSE since the start of the year, while Wipro shares experienced a 14.8 per cent decline. HCL Tech, on the other hand, was rewarded for its strong performance in recent times with a 35.1 per cent rise in its share price. TCS gained 6.8 per cent.

However, the Nasdaq-100 ETF has not yet captured the imagination of Indian investors in a big way. According to market data, purchases of N-100 ETF units have averaged 3,576 units per day during 2012 so far. The lack of enthusiasm despite the superb returns from the N-100 ETF in 2012 can be largely attributed to the lack of awareness among investors about the product, besides aversion to investing in overseas companies.

> arvind.jayaram@thehindu.co.in

Published on August 04, 2012
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