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Tech funds slid on oil spill

Thanks to the oil spill, technology stocks have again skidded on the bourses. This has wiped off a s


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Thanks to the oil spill, technology stocks have again skidded on the bourses. This has wiped off a substantial chunk of gains, registered by technology funds in the last one month. While BSE Sensex is off 10.48 per cent from its recent high of 4764 points (September 12), the Value Research category of 13 technology funds has lost 12.56 per cent during the same period. The free fall in technology-laden Nasdaq has had a domino impact on the bourses across the globe and has pulled down Sensex by nearly 500 points in the last one week. Foreign institutional investors have been net sellers on the Indian bourses in the last four trading sessions, with most of the sales pressed in technology counters. According to the Securities and Exchange Board of India, FIIs have been net sellers to the tune of Rs 422 crore on the bourses in the last four trading sessions. With oil prices at a 10-year high, FIIs have been liquidating their holdings on fears of interest rate hike in the US.

Among the worst hit in the recent technology carnage are UTI Software, Tata IT and IL&FS e-COM Fund. While, UTI Software lost a whopping 16.15 per cent with its NAV plummeting by Rs 4 from Rs 24.83 to Rs 20.82, Tata IT was just a hair away losing 16.05 per cent with its NAV falling from Rs 13.08 to Rs 10.98. IL&FS e-COM Fund, yet to reach the par value, lost 15.62 per cent from Rs 7.17 to Rs 6.05. All these funds had a concentrated portfolio with the top five holdings of each of them accounting for nearly 47 per cent of their respective portfolios. Incidentally, for the one-month ended September 15, 2000, UTI Software had posted an impressive gain of 19.1 per cent closely followed by IL&FS e-COM at 18.8 per cent. These two funds ranked second and third respectively among 13 of Value Research category of Technology funds. Tata IT, during the same period had gained 13.13 per cent.

The two technology funds from Kothari Pioneer are the least hit, with the NAVs dropping by around 12 per cent, each. While the fall in Internet Opportunities has been cushioned by investments in old economy stocks like M&M, Crisil, ICICI and Cadbury, a high cash component of around 20 per cent seems to have stemmed the fall in KP Infotech.

The current year has been a disaster for technology funds and their investors, who had poured an estimated Rs 2200 crore earlier this year in seven new-generation technology fund IPOs. With the markets witnessing an unprecedented bout of volatility, both technology stocks and funds have been mauled with NAVs of all the seven funds below par. These funds have suffered average erosion of 28.36 per cent from their offer price of Rs 10. While technology continues to be a sustainable theme with excellent long-term potential, investors in these funds should learn to cope with the short-term gyrations in the NAV.

 
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