In the last five years, fund managers of diversified equity funds have not been able to manage without technology stocks. And the reason is obvious-this sector has grown phenomenally in the last decade. There were only a few occasions when the allocation to the tech sector for of diversified equity funds was not the highest.
Of course, what has changed in the past five years is the percentage of this allocation. In 2000, funds were ecstatic about the tech sector and the allocation of the category to this sector went as high as 51 per cent! There were as many as 12 IPOs that year, all focused on the technology sector. It took fund managers a year more to realise that this sector was as susceptible to rises and falls as any other. Since then, fund managers have walked the safe path by reducing allocation to tech stocks, though they occupy prime position in every portfolio.
From the beginning of 2001-02, the overall exposure to technology sector in diversified equity funds has been the highest, but quite stable at around an average 14 per cent level. During the first quarter of 1999-2000 and second half of 2001-02, the FMCG sector reached the top sectoral allocation. The health care segment was third in the league till 2002.
Today, the portfolio has changed dramatically. Besides technology and FMCG, sectors like textiles, automobiles, chemicals, engineering and consumer durables have also made the overall picture quite diversified as compared to 2000. Stocks from the financial services sector have witnessed a continuous rise and they now dominate many of the fund portfolios. The financial services sector has become the second largest holding for all diversified equity funds, but technology remains the largest. While the economy is doing well across sectors and there has been a major turnaround in the manufacturing sector, funds still remain most bullish on tech stocks.
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