Technology sector funds worst performer last month

MUMBAI: Technology funds as a category appeared at the bottom of the performance charts with a loss of 4.38% in the last month ended November 1, says Value Research, a mutual fund tracking entity.

All five schemes in this category put together manage assets of Rs 183 crore. CNX IT Index has lost 4.99% in one month whereas S& P CNX Nifty has lost 1.02%.

There are two factors that have caused this underperformance to broad market. USD has seen some appreciation against rupee, which has resulted into analysts expecting pressure on margins of IT companies. USD has strengthened from Rs 52.67 to Rs 53.98 in one month. Another factor that has influenced is the results of presidential elections in the USA.

“If Barak Obama comes to power, there is a possibility of ongoing backlash on outsourcing to continue for some time,” says Abhishek Jain, head of research, JHP Securities. Anti outsourcing policy, if implemented seriously, will impact the volume growth from the key market – the USA.

Though in the short term there is an uncertainty on the volume growth and margins of Indian IT companies, experts expect these companies to offer good risk adjusted returns in medium term.