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PROJECT TITLE:
COMPARATIVE STUDY OF TOP 5
SECTORAL(TECH) FUNDS IN INDIA
SUBMITTED TO: SUBMITTED BY:
DR. ANUBHA GUPTA GROUP-10
DEEPAK KUMAR [FT-10-844]
CHANDAN KUMAR [FT-10-842]
HARSH VARDHAN [FT-10-858]
SHEKHAR MITTAL [FT-10-944]
SHUBHADIP BISWAS [FT-10-948]
SUPARAG MISHRA [FT-10-959]
PGDM 10-12
IILM-GSM
ACKNOWLEDGEMENT
The satisfaction and euphoria that accompany the successful completion of any
task of dream would be incomplete without mentioning the name of the people
whose constant guidance and encouragement has crowned all our efforts with
success.
Firstly we would like to thank DR. ANUBHA GUPTA for giving us her precious
time, encouragement and guidance that helped us a lot to making this project
compact and meaningful.
Last but not least we would like to thank all those people for their immense
cooperation who encouraged us in any way and without support of those people
this project never be completed successfully.
Most specially a special thanks to our family and friends.
EXECUTIVE SUMMARY
The mere words bring strong memories for investors, from the euphoria during the off-the-charts
growth of the late 1990s to widespread despair during the subsequent tech meltdown between
2000 and 2002.
Virtually all technology funds are stock or equities-only funds, and the majority of them fall into
the growth fund category in the Morningstar style box. These funds will invest in a wide range of
technology-related companies, including anything associated with the research, development and
the use of computers, software, communications, the internet, semiconductors or any other
segment of technology. Biotechnology funds are usually included in the healthcare sector,
although they can sometimes fall into the tech sector as well. As with most other types of funds,
tech funds can also be either domestic or global with regards to what securities are eligible for
purchase.
Technology is likely to be a big theme for 2011. Funds focusing on the Information Technology
sector have topped the list for the equity segment in the month of December-2010. However,
none of the best performing technology funds were able to deliver better returns than BSE IT
Index or CNX IT Index in December. In april-2011, the BSE IT Index and CNX IT Index gave
8.93% and 10.22% respectively.
The top performing tech fund in April-2011 is ICICI PRUDENTIAL TECHNOLOGY FUND
with a Month-to-Date (MTD) performance of 9.60% and a Year to Date (YTD) performance of
30.90%.
TOP FIVE TECH FUNDS IN INDIA-
ICICI Pru Technology Fund (G)
Franklin Infotech Fund - (G)
SBI Magnum SFU - Infotech Fund
Birla Sun Life New Millennium
DSP BR Technology.com (G)
The total traded value for the last six months of all CNX IT Index constituents is approximately
5.88% of the traded value of all stocks on the NSE. CNX IT Index constituents represent about
10.22% of the free float market capitalization as on March 31, 2011.
InfoTech Funds category gained 1.60% over one week period ended 4 March 2011. SBI Magnum
SFU – InfoTech Fund was the top gainer with a return of 1.95%.
Mutual Funds
Mutual fund schemes may be classified on the basis of its structure and its investment objective.
By Structure:
Open-ended Funds
An open-end fund is one that is available for subscription all through the year. These do
not have a fixed maturity. Investors can conveniently buy and sell units at Net Asset
Value ("NAV") related prices. The key feature of open-end schemes is liquidity.
Closed-ended Funds
A closed-end fund has a stipulated maturity period which generally ranging from 3 to 15
years. The fund is open for subscription only during a specified period.
Interval Funds
Interval funds combine the features of open-ended and close-ended schemes. They are
open for sale or redemption during pre-determined intervals at NAV related prices.
By Investment Objective:-
Growth Funds
The aim of growth funds is to provide capital appreciation over the medium to long-
term. Such schemes normally invest a majority of their corpus in equities
Income Funds
The aim of income funds is to provide regular and steady income to investors. Such
schemes generally invest in fixed income securities such as bonds, corporate debentures
and Government securities. Income Funds are ideal for capital stability and regular
income.
Balanced Funds
The aim of balanced funds is to provide both growth and regular income. Such schemes
periodically distribute a part of their earning and invest both in equities and fixed income
securities in the proportion indicated in their offer documents
Money Market Funds
The aim of money market funds is to provide easy liquidity, preservation of capital and
moderate income. These schemes generally invest in safer short-term instruments such as
treasury bills, certificates of deposit, commercial paper and inter-bank call money
Load Funds
A Load Fund is one that charges a commission for entry or exit. That is, each time you
buy or sell units in the fund, a commission will be payable. Typically entry and exit loads
range from 1% to 2%. It could be worth paying the load, if the fund has a good
performance history
Special Schemes
Industry Specific Schemes
Industry Specific Schemes invest only in the industries specified in the offer document.
The investment of these funds is limited to specific industries like InfoTech, FMCG, and
Pharmaceuticals etc
Index Schemes
Index Funds attempt to replicate the performance of a particular index such as the BSE
Sensex or the NSE 50
Sectoral Schemes
Sectoral Funds are those, which invest exclusively in a specified industry or a group of
industries or various segments such as 'A' Group shares or initial public offerings.
RISK HIERARCHY OF MUTUAL FUNDS:
SECTORAL MUTUAL FUNDS:
Sector mutual funds are those mutual funds that restrict their investments to a particular segment
or sector of the economy. Also known as thematic funds, these funds concentrate on one industry
such as infrastructure, banking, technology, energy, real estate, power heath care, FMCG,
pharmaceuticals etc. The idea is to allow investors to place bets on specific industries or sectors,
which have strong growth potential.
These funds tend to be more volatile than funds holding a diversified portfolio of securities in
many industries. Such concentrated portfolios can produce tremendous gains or losses,
depending on whether the chosen sector is in or out of favor. Sectoral mutual funds come in the
high risk high reward category and are not suitable for investors having low risk appetite.
Generally, mutual fund houses avoid launching sectoral funds as they are seasonal in nature and
do well only in cycles. Since these funds focus on just one sector of the economy, they limit
diversification and the fund manager’s ability to capitalize on other sectors, if the specific sectors
aren’t doing well. Unless a particular sector is doing very well and its long term growth
prospects look bright, it advisable not to trade in sector funds.
TECHNOLOGY FUND:
The mere words bring strong memories for investors, from the euphoria during the off-the-
charts growth of the late 1990s to widespread despair during the subsequent tech meltdown
between 2000 and 2002.
Technology is such an integral part of all aspects of our daily lives that the sector is virtually
certain to have more days in the sun. Despite this, many investors still look at mutual funds that
concentrate in this sector with great suspicion, wondering if the bottom might fall out on them
again. This article will examine the nature and composition of technology funds, as well as how
they performed both before and after the market downturn in 2000.
Virtually all technology funds are stock or equities-only funds, and the majority of them fall into
the growth fund category in the Morningstar style box. These funds will invest in a wide range of
technology-related companies, including anything associated with the research, development and
the use of computers, software, communications, the internet, semiconductors or any other
segment of technology. Biotechnology funds are usually included in the healthcare sector,
although they can sometimes fall into the tech sector as well. As with most other types of funds,
tech funds can also be either domestic or global with regards to what securities are eligible for
purchase.
Although there are exceptions, most technology funds tend to seek companies that fall into one
of two categories. The first category is made up of larger, more established technology
companies that have strong cash flow and substantial market share. The second is companies
(usually smaller ones) that have developed new ideas or patents that analysts believe will provide
significant potential for growth. The volatility inherent in this sector often results in high
portfolio turnover, which is usually greater than that of funds in other sectors, such as energy or
consumer staples.
PRESENT SCENARIO OF TECH FUND IN INDIA:
Technology is likely to be a big theme for 2011. Funds focusing on the Information Technology
sector have topped the list for the equity segment in the month of December-2010. However,
none of the best performing technology funds were able to deliver better returns than BSE IT
Index or CNX IT Index in December. In april-2011, the BSE IT Index and CNX IT Index gave
8.93% and 10.22% respectively.
Despite US Congress signing a bill to tax outsourcing services which is expected to increase
expenses of Indian IT companies, the IT sector stocks have performed well as the market is
expecting good quarterly results.
The top performing tech fund in April-2011 is ICICI PRUDENTIAL TECHNOLOGY FUND
with a Month-to-Date (MTD) performance of 9.60% and a Year to Date (YTD) performance of