Technology funds got a boost at the start of earnings season -- a higher than expected earnings report by Infosys with a rise of 37 percent in revenues and 28.5 percent in net profits. And tech funds gained sharply, as the technology funds have a sizable chunk of their portfolio in Infosys. Together, they gained an average 6.12 percent during the week against a 4.8 percent increase in BSE IT Index.
The sharp spurt may lure you to time your entry and exit in tech funds. But don't get tempted by these lofty gains. Such sharp gains and losses is their character. Technology sector remains a solid growth story. Even in their lean times they remain the fastest growing sector. The solidity of their business model is firmly in place. The productivity benefits are simply too large to be ignored for long, because any company that does become more efficient by doing things like paring inventory, automating administrative tasks any many other activities will have a very real advantage over competitors that have not implemented similar strategies. And global economic recovery can catalyse faster growth for the sector.
But technology will remain volatile. But the following rules can help you absorb the shock of technology investing. Technology stocks and funds are not suited for the weak heart. Invest only if you believe in technology. Make sure your allocation to technology funds or stocks is to an extent that you can with stand a rude shock. Only a long-term investor with the capacity to stomach higher highs and lower lows can successfully beat the volatility inherent in these funds. And regular periodical investment can enhance your betting average.
This week, the bond funds witnessed marginal loss. The medium-term bond funds lost an average 0.06 per cent whereas gilt funds slipped by 0.49 per cent.
Barring the Infosys earnings guidance, which pulled up the tech funds, it was just another usual week. Canbank Mutual Fund announced the redemption of Canpep-92, a closed-end tax planning equity scheme. IL&FS Index Fund replaced the exit load of 1 percent by an entry load of the same amount. And Escorts Opportunities, an equity-specialty fund, announced its maiden dividend of 1.25 per cent. As stipulated by regulations, the Tata Young Citizen Fund introduced an additional option of 'anytime exit'. The IL&FS eCom and Growth & Value Fund introduced a 7-days lock-in period from the date of subscription. Zurich India Sovereign Gilt Provident Plan has revised its investment composition, whereby now it will invest in government securities of long-term residual maturities but not necessarily in securities with residual maturity of 10-years as before.
Fund update: During the week, the market gained 10 points on the Sensex and 7 points on the broad based National Index. The key gainers during the week were Birla IT (10.26%), IL&FS eCOM Fund (8.52%), Alliance New Millenium (8.41%) and Pru ICICI Technology (7.58).