Return Tracker. What clicked for IT funds

The last one year has been a rollercoaster ride for equity mutual fund investors. After hitting record highs in 2015, the broad-based indices reversed the trend, and fell about 19 per cent.

A few sectors, though, performed relatively better. The S&P BSE Information Technology index fell lower, dropping around 11 per cent.

Six fund houses have dedicated schemes that invest in information technology and allied stocks. Tata Digital India Fund, launched in December 2015, is a very recent entrant.

The remaining five, Birla Sun Life New Millennium Fund, DSP BR Technology.com, Franklin Infotech Fund, ICICI Pru Technology Fund and SBI IT Fund were launched during the tech boom of 1998-2000.

Most of these funds are not software and technology pure-plays — some have exposure to stocks in entertainment and telecom sectors as well.

All of them have concentrated holdings, with the top 10 stocks broadly accounting for 60 to 70 per cent of funds’ portfolios.

Infosys was the universal favourite and holdings in it ranged between 25 and 39 per cent of total assets.

While all funds have delivered negative returns in the last one year, some have been able to cap losses better. Leading the category is DSP BR Technology.com with a negative return of 4.7 per cent over one year. Its bet of allocating almost a fourth of its portfolio to mid-and small-cap stocks played out well.

Additions in 2015 to stocks, such as Zensar Technologies, Dish TV India and Hexaware Technologies paid off.

However, losses from holdings in Redington India, Bharti Airtel and Tech Mahindra dragged overall returns.

Its average cash holding of 5 per cent, to some extent, limited its downside.

ICICI Pru Technology was down 9.9 per cent. The top 5 stocks — Infosys, TCS, HCL Tech, Wipro and Persistent Systems — constitute about 70 per cent of holdings. In 2015, the fund bought into TCS, HCL Tech and Mphasis.

The oldest of the lot, Franklin Infotech Fund, came in third with negative returns of 10 per cent. With low portfolio churn, it trimmed its holdings in TCS and completely exited Mastek. It added to its holdings in Tech Mahindra, HCL Technology, Infosys and eClerx Services.

Just two stocks, Infosys and TCS, constitute almost 60 per cent of total assets. Large holdings in TCS, Tech Mahindra and Cyient contributed to erosion in value.

Birla Sun Life New Millennium Fund was fourth, with a loss of 10.7 per cent. It remained almost fully invested in the market.

Its average allocation of almost 30 per cent to mid and small-caps, surprisingly, did not boost returns. Although its bet on Sonata Software, Firstsource Solutions and NIIT Technologies paid off, holdings in Persistent Systems, Cyient and Tech Mahindra hurt performance.

Bringing up the rear is SBI IT, down 13.9 per cent. Its top five holdings — Infosys, TCS, HCL Tech, KPIT Technologies and Tech Mahindra — make up almost 75 per cent of total holdings.