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Bad Timing?

After an ill-fated launch, the struggle for this fund is not over yet. It maintains a highly concentrated portfolio. But the concentration is in quality counters like Infy, Wipro and TCS and one can expect some better performance in the times to come

Kotak Tech has never managed to recover from ill-effects of a badly-timed launch. Launched at the peak of the ICE rally in early 2000 the fund mopped up Rs 230 crore in those days.

With the bourses in a tailspin since its launch, the fund was faced with a falling market. With a focus on technology stocks, the fund also invested in companies, which have business application in any area ranging from entertainment to biotechnology, space to farming.

The fund has proven to be a big capital eroder, eroding nearly 62 per cent of the capital since inception. Within a year of lunch its size was reduced to Rs. 70 crore. The bursting of the technology bubble seems to have taken a permanent toll as the fund was never able to take its NAV back above Rs 10. The fund allocated 10 per cent of its portfolio to non technology stocks like HDFC Bank , ICICI Bank and Ranbaxy, holding around 35-40 scrips.

In 2002 the fund underwent a major revamping in its objective, philosophy and the fund manager as well. It became a pure technology fund with BSE IT as its benchmark. The number of scrips were reduced to an average of 15-20 with the focus on fewer and better stocks in the tech sector. The effect of this restructuring was evident when it outperformed its peers and posted an annual return of 22.57 per cent, way above the category average. Later also the fund has shown yearly returns of around 37.95 per cent in 2003 and 22.57 per cent in 2004.

The fund manager's affinity for the tech major Infosys has also been clearly evident in its portfolio breakup. Infosys constituted 19.12 per cent of its net asset percentage as on January 31, 2004 which has now been increased to almost 48 per cent as on April 30, 2005.

This strategy of a heavily concentrated fund management gives it a bit of stock specific risk, but if the concentration is in quality counters like Infy, Wipro and TCS one can expect some better performance in the times to come.