Majority of equity mutual funds would feel the pinch of today's retreat on the Dalal Street for maintaining a high exposure to tech stocks--the BSE IT Index is down 6.17 per cent. NAVs of a few of them would plunge.
For example, Kotak Tech fund manager would find today's NAV calculation as one of the most difficult task of his life. He would realise why too much of a good thing can be really bad sometimes.
The fund has half of its portfolio invested in Infosys--the stock that has plunged nearly 7 per cent today. It's other top holdings including Wipro and TCS too have lost heavily. Though most of the tech funds have high allocation to Infosys, there's no match of Kotak Tech.
Many equity diversified and tax-planning funds would suffer today for going overboard on technology sector. Consider this: of around 125 equity diversified and tax-planning funds as on March 31, 2005, 47 had technology as their top sector. Of these, 26 had a quarter of their portfolios invested in tech stocks. Overall, 86 funds had technology in their top five sector allocation.
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Many had high allocation to individual tech stocks. For instance, Alliance Frontline Equity had 11.04 per cent exposure to Infosys alone.
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