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Four technology funds go below par

Aabhas Pandya

The mayhem on the bourses has pushed four new generation technology funds below the par value - Prudential ICICI Technology, Sun F&C Emerging Tech, IL&FS e-COM and KP Internet Opportunities - falling below Rs 9. In fact, the tech fund from Prudential has lost 23.40 per cent from its offer price of Rs 10 with its net asset value (NAV) at Rs 7.78 on April 6. The relentless butchering of the convergence stocks, culminating in the 364-point fall in the Sensex on Tuesday, has led to an average decline of 21.44 per cent from the NAVs at which the five technology funds had gone open-ended.

However, led by technology stocks, the markets have bounced back with the BSE Sensex up 350 points on Friday after a 110-point gain on Thursday. Even if one factors the current spurt in the market, the technology funds are available at very attractive levels for long-term investors. In the short-term, technology stocks will continue to be volatile with stock-specific trading as full-year results start trickling in.

Amidst the sharp fall, Alliance New Millennium is the only technology fund, which has managed to stay above par. The fund's NAV was at Rs 10.84 on April 6, still up 8.4 per cent from its offer price of Rs 10 but down 29.1 per cent from its opening level of Rs 15.29. In fact, the fund has lost over 41 per cent from its peak of Rs 18.45 early last month.

Kothari Pioneer Internet Opportunities Fund (KP IOF), which had mobilised a record Rs 5.55 billion from 150,000 investors, has lost 6.78 per cent from its starting NAV of Rs 9.58. KP IOF was at Rs 8.93 on April 6, down 10.7 per cent from the par value of Rs 10. Interestingly, the fund had invested only 35 per cent or Rs 1.95 billion of its corpus as on March 29. The large cash component to the tune of Rs 3.60 billion gives the fund an excellent opportunity to pick up technology stocks at extremely attractive valuations.

The top ten holdings of the fund are Satyam, Zee Telefilms, Infosys, Mastek, NIIT, HCL Tech, ICICI, HLL, Hughes Software and HDFC. The presence of HDFC, ICICI and HLL in the portfolio should not be surprising as its investment philosophy allows it to invest in brick-and-mortar companies leveraging internet for business expansion, besides Internet portals and Internet Service Providers (ISPs).

Similarly, Sun F&C Emerging Technology Fund, which opened on April 3 at Rs 8.56, has dropped by another 50 paise to Rs 8.06 on April 6. The fact that the fund has gone open-ended at 18.7 per cent discount to its offer price shows that almost all its bets have received a drubbing on the bourses. However, the fund is also sitting pretty on a cash component of over 40 per cent or close to Rs 1 billion.

The high cash component in both the funds has helped them cushion the fall to great extent vis-a-vis almost fully invested funds like Alliance New Millennium and IL&FS e-COM Fund and will now help them go bargain hunting on the bourses.

Among the software funds, both UTI Software and Kothari Pioneer Infotech Fund (KPIT) have lost over 35 per cent from their respective peaks on March 7, 2000. While KPIT has dropped from Rs 56.15 to Rs 35.56 on April 5, UTI Software has dropped by Rs 16.42 from Rs 46.93 to Rs 30.51 on April 4. The growth plan from Birla IT has slipped by 25 per cent to Rs 29.86 as on March 31, 2000.

Source: Value Research

Mutual Funds

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