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Sectoral funds – Weekly roundup - Views on News from Equitymaster
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  • Apr 14, 2001

    Sectoral funds – Weekly roundup

    This week saw significant selling on the bourses. The BSE Sensex crashed by 10% to close at its two year low at 3,188 points, whereas the S&P CNX Nifty slumped by 9% to close at 1,026 points.

    TATA IT SECTOR 6.8 -3.4% -4.5% -60.4% 6.9%
    BIRLA IT G 7.6 -6.0% -6.5% -73.8% -3.4%
    CHOLA FREE.TECH C 8.1 -7.9% -12.1% -62.6% -7.0%
    KP INT OPP G 4.2 -13.7% -12.7% -55.7% -54.7%
    PRU ICICI TECH G 2.7 -16.9% -16.7% -70.4% -71.0%
    IL&FS ECOM G 2.4 -17.4% -23.0% -77.6% -79.3%
    SUN F&C EMEG TEC G 3.0 -18.1% -20.1% -66.6% -64.2%
    UTI SEC- SOFTWARE 6.7 -19.2% -18.8% -78.8% -25.3%
    DSP ML TECH.COM G 3.1 -19.7% -22.4% 0.0% -64.3%
    K TECH 2.7 -20.0% -20.0% 0.0% -65.8%
    MAGNUM IT 5.5 -20.0% -23.4% -79.2% -8.2%
    KP INFO G 11.1 -20.7% -21.7% -74.0% 37.3%
    ALLIANCE NEW MI G 3.5 -22.9% -24.2% -72.1% -72.7%

    Its been a very sad end to the software story. What seemed unimaginable finally happened when Infosys disappointed (for a change) with its fourth quarter FY2001 results this week and posted a disappointing 3% quarter-on-quarter growth in revenues and a 9% rise in net profit. Software stocks witnessed large-scale during the week and some IT funds have seen their NAVs (net asset values) fall below Rs 3.

    MAGNUM PHARMA 8.1 -6.5% -7.5% -27.7% -12.0%
    KP PHARMA G 7.9 -8.0% -10.7% -27.0% -7.9%
    UTI SEC-PHARMA 8.6 -10.5% -13.2% -29.9% -17.0%

    The mood in pharma stocks continues to be dim. The negative sentiment in software stocks did not spare even the pharma sector. As is apparent from the table above, pharma funds have fallen significantly over a month, a lot more than FMCG funds (see table below). Only Cipla was able to hold its own, while other pharma stocks fell.

    KP FMCG G 10.4 -3.3% -1.0% -21.9% 3.0%
    PRU ICICI FMCG G 8.6 -4.1% -2.6% -21.7% -9.2%
    MAGNUM FMCG 6.3 -5.4% -9.4% -40.1% -23.1%

    Even FMCG stocks witnessed repercussions from the tech meltdown effect. However, they did not fall as hard. Hindustan Lever (HLL) in particular stood like a rock and showed no signs of wavering unlike its tech peers. There is a feeling that with increased nervousness in software, mutual funds may turn to FMCG stocks particularly HLL. As if to bear testimony, Britannia and Asian Paints showed some gain on Thursday (April 12, 2001) when the BSE Sensex fell 141 points. Given the low NAVs of FMCG funds and the sector potential, it is a good time to enter FMCG funds. However, given the lack of diversification in such funds it is a high-risk, high-return investment strategy.



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