VR Logo

Tech Funds on Comeback Trail

The Technology Funds staged a comeback with a smart recovery in the technology stocks within the last week

Bruised technology funds have finally got some balm with the sustained rise in ICE stocks since the beginning of last week. The current rally has been lead by technology stocks with the Sensex gaining 406 points or 13% in just 8 trading sessions. On the other hand, technology funds have posted an average gain of 23%.

The list of top gainers includes ING Growth Portfolio, which is a pseudo technology fund with 95% of its investments locked in the volatile sector. In fact, ING Growth Portfolio has been a chart buster with a 37% rise in a short-spell with the NAV jumping to Rs 7.33. The gain is largely attributed to the fund's concentrated holding in Wipro, which has made impressive gains after encouraging results and positive earnings outlook.

However, the rise in technology funds has failed to match the spurt in most tech counters. A sample of 12 ICE stocks has rocketed by an astounding 79% in the same period. However, the gains are clearly demarcated here with stocks from the K-10 group bouncing back with a vengeance. Although these stocks are nowhere close to their highs, the jump still underlines the extremes in tech investing. For instance, Global Tele has vaulted from Rs 100 to Rs 260 while HFCL is up Rs 100 to Rs 170.

On the other hand, Infosys and Hughes have gained a more sober 37% in the recent run up. This is one reason why funds have failed to register sharper gains with most of their assets locked in top-rung technology stocks. Further, most tech funds had hiked their cash component in March itself when technology stocks had started to tumble. Holdings in cash pull down the average gains in times of a rally. For instance, Chola Freedom Technology, with over 55% asset in cash on March 31, has moved up only 7 per cent.

While tech funds still have a long way to go with an overwhelming number still sharply below par, the current advances in NAV highlights the unpredictable nature of investments in technology sector. Just when it seemed that ICE stocks have been written off, they have made a strong comeback. You just never know when the tide will turn here. Thus, investors must learn to be patient with their technology funds, if they have the courage to withstand the volatility. This way, they can still hope to earn decent returns rather than pushing the redemption button in panic.

"Still, A Long Way to Go"
    16-04  24-04  %Gain
  ING Growth Portfolio 5.35 7.33 37
  DSPML Technology.com 3.15 4.09 29.84
  Alliance New Millenium 3.77 4.81 27.59
  K Tech 2.87 3.63 26.61
  IL&FS eCOM Fund 2.51 3.17 26.29
  KP Infotech 23.64 29.34 24.11
  UTI Software 8.57 10.57 23.28
  Pru ICICI Technology 2.81 3.46 23.13
  Magnum IT 9.89 12.03 21.55
  Sun F&C Emerging Tech 3.11 3.72 19.61
  KP Internet Opportunities Fund 4.44 5.23 17.79
  Birla IT 7.90 8.85 12.03
  Chola Freedom Technology 8.24 8.83 7.16