Get out of technology mutual funds, say advisors

Many mutual fund advisors have finally made up their mind about IT or technology schemes. After putting these schemes on the watch list for more than a year, most of these advisors are asking their clients to get out IT mutual fund schemes. The category has returned -3.90 per cent in the past one year and 9.75 per cent in the last three years.

“I think we have given a lot of time to the technology funds to perform. The IT sector’s outlook isn’t good in the near-term. It is high time, investors should move out of them,” says Vivekh Pathak, a Certified Financial Planner based in Delhi.

The IT sector has been badly hit by global economic and political factors. The US President Donald Trump's focus on curbing outsourcing and immigration have put a question mark on the business model of Indian IT companies. Most advisors believe that it will take a while for the sector to get its mojo back.


“The IT sector is struggling because of many reasons, including global disruptions and valuations. Many schemes have been underweight on IT stocks lately. The chances of the sector performing great this year are less,” says Gaurav Monga, a Certified Financial Planner.

Though some advisors concede that a few select IT companies might do well, they believe the prospects of the entire sector looks dim now. “Domestic technology businesses, companies going big on new technology like cloud computing might do well in the future. But investors shouldn’t be betting on the IT sector in the near-term,” says Karthik Swaminathan, a Certified Financial Planner.

What should investors do?

Sure, it makes sense to get out of a scheme if your advisor asks you to do so. But what should you do with the money? Gaurav Monga asks investors to put their money in diversified equity schemes rather than going for another sector scheme. “It is better to put your money in a diversified scheme. These schemes inevitably pick up best performing stocks from all the sectors,” says Monga.

He adds that investors with a large portfolio can invest in infrastructure and FMCG for diversification. “For investors, who want to invest in sector specific schemes, infrastructure has a good outlook and FMCG is always a good idea,” he says.