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Technology Beckons

As many as 25 fund houses have increased their exposure to the IT space

Technology stocks are once again being sought out and seem to have found their place in the sun. The category of technology funds has delivered an average return of 113.12 per cent between March 9, 2009 and August 31, 2009. During this period, the BSE IT index delivered 106.02 per cent and the Sensex returned 91.98 per cent. Why the spurt of interest in technology stocks? Simply because the rupee depreciation and the recovery in the West, specially the U.S. market, are great tailwinds for the software industry. 

As many as 25 fund houses have increased their exposure to the IT space. DSP BlackRock Mutual Fund has steadily increased its allocation and Technology is currently its fourth most invested sector, up from the 11th place it occupied last year.

A most noteworthy change in heart amongst the fund managers has been with Satyam. After shunning the stock at the start of the year, they are vigorously chasing it now. Between April and July 2009, the number of Satyam shares in the portfolios of mutual funds went up from 8.08 lakh to 2 crore, a whopping 2,471 per cent jump. The number of funds buying the stock went up from 4 to 18 (in July 2009), with Reliance Taxsaver and Bharti AXA Equity being the major buyers though Sundaram BNP Paribas Mutual Fund held the biggest position of 26.87 lakh shares by the end of August.

Mphasis and Wipro are the other tech darlings. Since the start of the year, the number of funds buying into these stocks has gone up from 16 to 65 (Mphasis) and 10 to 51 (Wipro). In the case of Mphasis, the scale of purchases made by Sundaram BNP Paribas Select Midcap (1.02 crore in March) and Reliance Regular Savings Equity (1.02 crore in February) are the most prominent buys.

The fascination with Tech Mahindra started post-February and is currently in the portfolio of 25 funds, up from 10 (February 2009).

Financial Technology, though not in the same league as Wipro and Mphasis, has seen quite a bit activity this year. From just 1.9 lakh shares in the portfolios (December 2008), the funds have bought an additional 30 lakh shares till July taking the fund count to 25. Reliance Mutual Fund has been the most active fund house in this scrip and has bought into close to 26 lakh shares via Reliance Equity, Reliance Growth, Reliance Regular Savings Equity and Reliance Vision.

Patni Computer Systems, Hexaware Technologies and OnMobile Global are the other scrips which have also witnessed significant buying.

What about the old stalwarts like HCL Technologies, Tata Consultancy Services and Infosys Technologies? Allocation to these stocks have risen but paled in significance when compared to smaller stocks.