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Results may drive tech funds

Nilanjan Dey

THIS week, technology funds are expected to figure among the most happening ones, thanks to the impressive financial performance that some leading information technology companies such as Infosys and Satyam have recorded. Presumably, IT stocks woul d ride the back of these quarterly results.

But, these are still early days. It is to be seen whether equity funds in general begin to re-work their strategy on investing in tech stocks on a long-term basis. A few of these had consciously scaled down their IT exposure and sought recourse to the so -called old economy sectors.

Going by SEBI figures, gross sales outstripped purchases in March, indicating widespread redemptions when the market fell. This trend was back in June insofar as equity funds are concerned. The current month, so far, has been no different, and till July 13, gross sales overtook purchases by over Rs. 260 crores.

Recent days have seen NAVs of diversified funds remain stable on a week-on-week basis. There have been no spectacular changes in the stock market, and few expect such changes to take place in the near future. These funds, a section of the market feels, w ill continue to sustain stability of capital to investors in the days ahead; predicted quirky reactions from FIIs notwithstanding.

Those who root for old economy/defensive plays will, perhaps, be pleased to know that at least one technology-centric fund has invested in such scrips. Examples are HDFC and Cadbury. The choice of HDFC may be attributed to its belief that the company wil l do well in the new economy because of its involvement in a property portal and a stock trading venture.

Cadbury, which is linking its sales offices and plans to use the Net to service distributors, has developed two Web sites to focus on festival/gift purchases. As for hits, one out of every five visitors is said to be placing orders online.

In the debt funds category, concern persists over fiscal deficit, inflation and pressure on the rupee. A major factor naturally is Government debt and its impact on the interest rate regime.

It is to be seen whether the RBI goes in for short-term tightening in the money markets, as it did a few weeks ago. Bond prices will look up when pressures ease on the rupee front. Recovery in prices will also depend on fresh issues of bonds.

At a more micro level, a section of funds continues to suffer from non-performing assets, and some of them are not able to reach settlement on overdue NPAs. Provisioning and follow-up action involve sizeable resources.

MF trivia

Here is food for thought for investors - the rule of 100 - a three-step guide to determine how much and where to invest, brought to our notice by an MF distributor. Step one, subtract your age from 100. Step two, put that percentage of your investible co rpus in equity/equity funds. Step three, invest the rest in debt/income funds, after subtracting the amount that you may need for consumption.

FUNDSPEAK

Mr. Anand Radhakrishnan, Fund Manager, Sundaram MF.

A combination of factors such as declining interest rates, expected higher industrial production and M&A activity would lead to improved valuations of companies.

Mr. A.R. Prabhu, CEO, GIC MF.

While economy-related sectors are expected to show more than sedate growth than the previous few quarters, we expect most of the surprises, both positive and negative, to come from the new economy stocks.