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Investments made in the information technology (Infotech) sector over the past five years would have yielded returns much higher than the Nifty and Sensex. Over the past year, all the funds in the infotech category have beaten their benchmarks, the BSE IT and BSE Teck indices.
While the larger names in the IT pack have somewhat slowed down after a prolonged rally over the past few years, the mid-tier players continue to thrive on the back of growth in financials as well as attractive valuations.
Information technology companies have been doing well over the past few years with support from a mild recovery in the US and Europe. The rupee too has been supportive, mostly hovering below 60 against the US dollar.
Several mid-tier IT companies too have performed well, registering new highs. Among the five funds with their investment theme as ‘technology’, Birla Sun Life New Millennium and DSP BR Technology.com also have small allocation to telecom and media sectors. Franklin Infotech, ICICI Pru Technology and SBI IT have taken exposure mainly to IT or ITeS stocks.
ICICI Pru Technology is among the best in the category, outperforming its benchmark and even the broader markets across timeframes. It invests 30 per cent of its assets in mid-cap stocks and around 12 per cent in small-caps, while 56 per cent is set aside for large-caps. Infosys is the key holding, accounting for 30 per cent of ICICI Pru Technology’s portfolio. Allocation to and mid-tier stocks such as MindTree and Persistent Systems was also the key to its outperformance. Most other funds in the category tilted towards large-caps. Mindtree, Persistent Systems and Cyient (formerly called Infotech Enterprises) are some key holdings of technology funds. These stocks have marked new highs in the past four months, thus helping the funds register significant gains.
DSP BR Technology.com and Franklin Infotech have Tata Consultancy Services as their top holding. Franklin Infotech and DSP BR Technology.com have delivered the least returns of 46 per cent and 48 per cent, respectively, over last one year. Both accorded high weightage to TCS which has been moving sideways for more than six months.
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