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Fund Focus: Pru ICICI Technology

Apt for ambitious investors ready to bear market shocks

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This fund is known for springing surprises -positive as well as negative. The fund generates exceptional returns in a booming market, but melts during market crashes.

Since March 2006, the second-largest technology fund has done well in the July-September and October-December quarters - when the markets were buoyant - generating returns of 16.75 per cent and 27.34 per cent, respectively. But the fund gave a negative return of 10.44 per cent in the quarter ended June 2006 as against a 7.12 per cent loss in the BSE IT index, emphasizing its inaptness to protect investor wealth in a falling market. In fact, between May 10 and June 30, the fund slipped a massive 23.60 per cent, the most by any technology fund. Again, in February 2007, when the markets turned weak, it figured on top of the losers' list -the fund lost 10.7 per cent during the month ended March 9.

The fund, which started as a large-cap oriented fund in April 2000, has of late developed a strong liking for mid- & small-cap companies. This has resulted in the fund becoming aggressive and extremely volatile with a standard deviation of 7.20, the highest in the category. But its bets on mid- and small-caps paid off handsomely. In 2006, the fund's performance was the best - with a return of 51.6 per cent - in the category of technology funds (46.29 per cent). With a massive exposure to mid- and small-cap stocks (an average of almost 74 per cent between March 2006 and February 2007) the fund maintains a portfolio of around 30 stocks. It limits its exposure to individual stocks at around 10 per cent with top five holdings accounting for an average 42.58 per cent (March 2006-February 2007) of the portfolio.

Investors ready to brave instability and stay invested for the long-term may see handsome returns in future.