Prudential ICICI Technology is highly aggressive (at 8.73, its standard deviation is the highest in the category) and maintains huge allocation to relatively risky mid- and small-cap funds. When its bets work out this fund does very well but when the going gets tough, it quickly loses its lead over peers.
A good example was the fund's performance between May 27, 2003 and January 5, 2004. It exploited the bull-run and surged 130 per cent to become the only fund to beat the BSE IT Index during the period. However when the equity markets turned its tail in January last year, the fund had a free fall-it lost 14 per cent in the first half of 2004. Huge exposure to mid- and small-cap stocks (an average 59 per cent between January and June 2004) dragged the fund down.
In the next quarter the fund outperformed the category by a good margin but again slipped in the last quarter of 2004 to become the worst performing fund of the year-it could manage only 17.08 per cent as against the category average return of 23.77 per cent. The fund has raced ahead so far this year (till February 28, 2005) and gained 5.78 per cent, the best in the category.
Its liking for mid- and small-cap stocks coincided with the rally in the segment in 2003. Picks like Tata Telecom, Cranes Software, Blue Star Infotech and Bharat Electronics earned handsomely for the fund and it ended 65.29 per cent up in 2003. However, this strategy failed to click last year as its mid-cap holdings, including I-Flex Solutions, lost heavily.
The fund had good exposure to the stock (over 7 per cent), which it sold off in April 2004. However, the stock is back in the portfolio-as on January 31, 2005, the fund had 6.52 per cent of its assets in the scrip.
Though the fund invests in large-cap stocks, they hardly form its core. In fact this is what that separates this fund from majority of the other tech offerings. Overall, the fund maintains a diversified portfolio spread over 25 to 30 stocks.
This article was originally published on May 30, 2005.
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