• FEBRUARY 6, 2001

IT funds regain respectability

Last month we witnessed something we haven’t seen in a long time. A sustained rally in software stocks. This has pulled up net asset values (NAVs) of infotech (IT) funds.

Open-ended, IT Funds NAV(Rs) Last week Last month Last year Inception
Tata IT Sector Fund 9.3 -0.3% 16.8% -45.6% 14.8%
K P Infotech (Gr) 24.4 -0.8% 14.3% -39.7% 94.8%
Chola Freedom Tech (Cum) 13.2 -0.1% 13.9% -30.9% 9.0%
IL&FS eCOM Fund (Gr) 5.3 -1.1% 13.2% 0.0% -61.0%
Pru ICICI Tech. (Gr) 5.2 -1.5% 13.0% 0.0% -46.8%
DSP ML Tech.com (Gr) 7.0 -1.4% 11.9% 0.0% -18.6%
K P Internet Opport.(Gr) 6.9 -0.1% 11.8% 0.0% -27.8%
Alliance New Millenn (Gr) 7.6 -1.8% 11.2% 0.0% -50.0%
K Tech 6.1 -2.3% 10.6% 0.0% -22.7%
UTI Sector- Software 14.6 -2.9% 9.8% -30.0% 22.7%
Magnum Sector Funds-IT 12.3 -2.5% 9.5% -51.8% 54.2%
Birla IT Fund (Gr) 13.8 -0.7% 9.5% -52.5% 6.7%
Sun F&C Emerg Tech (Gr) 6.0 -1.0% 8.6% 0.0% -30.4%

Quarterly results of leading software companies have shown that domestic software companies continue to be on a roll as far as fundamentals are concerned. In our meetings with mutual fund personalities, we have learnt that there is very little concern of the US slowdown affecting Indian IT. Sample what Mr Sunil Joseph (President, Director of Dundee Investment Management and Research) has to say in this regard, ‘Our IT expertise does not include making software products, rather, we are service providers and are placed at the lower end of the ladder. So I do not see us getting affected by a US slowdown for at least 2-3 years, and I feel that way very strongly.’

The link between Indian IT and the NASDAQ has also weakened considerably over the last month. While leading IT stocks on the NASDAQ have been declaring profit warnings, leading Indian software companies have performed admirably. This has highlighted the fact that what works in the US does not necessarily work here as far as IT is concerned, simply because the nature of work of both categories of companies is quite different.

However, it remains to be seen how long this ‘delinking’ between domestic stock markets and the NASDAQ works. From an investment perspective, investing in IT funds at current NAVs makes sound investment rationale for the investor who is willing to take on risk to boost returns. For ‘safer’ investors IT funds continue to remain a strict no-no.

Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (Research Analyst) bearing Registration No. INH000000537 (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA, Canada or the European Union countries, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

Equitymaster Agora Research Private Limited (Research Analyst)
103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407