Technology funds NAV up 33% since mid-April

Jai Kumar NR

New Delhi, May 7: AFTER suffering crores of rupees in capital erosion, the investors of the technology fund, have something to cheer about.

The technology funds have seen up to 33 per cent spurt in net asset values (NAVs) since mid-April. Investors will heave a sigh of relief as the current rise in NAVs is led by a rally in software stocks since April 12 and not due to any significant jump in inflows.

The current spurt in NAVs of these sector-specific IT funds may not give any exit opportunities for those investors who do not subscribe to the tech story anymore.

For, tech funds’ NAV is still languishing below par, except for KP Infotech.

Interestingly, all the tech funds have under-performed the BSE IT index by a wide margin. While tech funds’ NAV gained 11-33 per cent, the BSE IT index spurted by 56 per cent from 1086 points as on April 12 to 1698 points as on May 4.

This was partly due to the high cash component of tech funds and some marginal redemptions.

Says Delhi-head of a mutual fund: ‘‘Tech funds are keeping a very high cash exposure and their current average exposure is 20 per cent.’’

As on March 31, Chola Freedom Tech which is the lowest gainer in the list had 55 per cent in cash. The BSE Sensex during this period gained 10 per cent.

During this period, technology stocks have been on a major rally. Some of the major gainers are Wipro (gained 94 per cent), Digital Equipment (88 per cent), HCL Tech (74 per cent), DSQ Software (61.49 per cent) and Polaris Soft (59.39 per cent).

The institutional buying has infused a fresh lease of life into the tech counters in a market where trading volumes are very thin.

‘‘Foreign funds and domestic institutions to some extend have been buyers in technology stocks. Since this is virtually a cash market and short-selling is banned, even a little buying is bound to prop up the stocks,’’ says the fund source.

‘‘US stocks have resumed a rally and another round of Federal rate cut is expected to happen. If the US economy sends out some positive signal and IT companies perform better than the predictions, the current buoyancy in Indian software stocks may be sustained,’’ says another fund source.

NAVs of IT funds like Alliance New Millennium, K Tech, DSPML Tech, Pru ICICI Tech, KP Internet, IL&FS eCom and Sun F&C Emerging (which were launched during the peak of the IT rally) are still way below the par value.