Tech bets start paying off for mutual funds

About ten months ago, technology stocks weren't exactly the darlings of the street. On one side was the sudden and shocking resignation of a top executive amid a quagmire of allegations, while other issues like US visa cost implications, automation angle and low margins did their bit to compress valuations of IT stocks in India. Fund houses responded by merging or rejigging the fundamental attributes of IT sector funds, and diversified funds cut tech bets as if the writing was on the wall -- traditional IT was over. The last three months (till April 12, 2018) have shown that IT is not dead as investors have once again flocked towards the sector. When telecom scrips are down 21 per cent, PSU banks are down 20 per cent, metals down 11 per cent and oil shares down 10 per cent, 'defensive' technology/IT sector is shining bright with 10 per cent gain. This has helped mutual funds that had swam against the tide. Let us find out more. 2018 ushers change Having limped to a rather depressing finish in 2016, the tech sector stocks have come back in the reckoning in 2017 and 2018. The last 3 months have been trying time for the Indian stock market. Almost all sectors are in red, with IT sector standing out. Historically, the IT sector has been a favourite for investors looking at high free cash flow generation. The worldwide tech outsourcing boom helped companies like Infosys, TCS, Wipro, HCL Technologies do well. The good and stable financial performance of these companies, which are essentially large-cap, attracted investors in droves. But life is full of ups and downs. The down years like 2008, 2011 and 2016 have come but have been followed by strong rebound in 2009, 2013, 2014, and 2017. The third quarter of FY18 was muted for most IT companies since it is a seasonally weak period. Geography wise, Europe led growth for these companies amid the slowdown in the US market. BFSI segment (ex-insurance) continued to be under pressure while energy saw good growth and retail probably exhibited early signs of recovery. Management gu