The Hindu Business Line : New Economy MFs post negative returns in 2001

NEW economy mutual funds performed poorly in 2001. The Net Asset Value (NAV) of these funds moved southward, registering negative returns ranging between 20 and 50 per cent.

An analysis of 17 schemes (including various options offered by individual funds) dedicated to the information technology, telecommunication and entertainment sector shows an average negative return of 35.33 per cent between January 1, 2001 and December 31, 2001.

Most of these funds were launched during the stock market boom in the last quarter of 1999 and the first quarter of 2000. The fund managers made investments in the new economy stocks at their peak levels, but the fall in stock prices eroded their NAVs. Besides, in 2001, various crises ranging from the Ketan Parekh scam and UTI fiasco to the September 11 terrorist attack in the US led to a further fall in the new economy stocks.

Among these funds, Kotak Mahindra's K-Tech fund leads the pack with the highest negative return of 50.90 per cent during 2001. The fund's NAV dropped from Rs 5.54 to Rs 2.72.

SBI Mutual's IT Fund comes second with a negative return of 47.58 per cent as its NAV fell from Rs 11.41 to Rs 5.98.

Come next, Alliance Capital's Alliance New Millennium Dividend and Growth schemes, which registered negative returns of 41.37 and 41.15 per cent respectively. While the Dividend scheme's NAV slipped from Rs 6.96 to Rs 4.08, the Growth scheme's NAV declined from Rs 6.95 to Rs 4.09.

The much-in-news Unit Trust of India (UTI) is next in line with its UTI GSF Software scheme's NAV falling from Rs 13.24 on December 27, 2000 to Rs 7.83 on November 30, 2001, registering a negative return of 40.86 per cent.

The top five are followed by the likes of IL&FS's E-com schemes, Prudential ICICI's Tech Plan, Pioneer ITI's Infotech funds, DSP Merrill Lynch's Tech.com, Sun F&C's Emerging Tech scheme, Cholamadalam Cazenove's Chola Freedom Tech schemes, Pioneer ITI's Internet Opportunity scheme and Birla's IT schemes.

Mutual fund analysts said the fall in NAV of all new economy-dedicated mutual funds was due to their high exposure in momentum stocks such as Zee Telefilms, HFCL, GTL (formerly Global Telesystems), Pentamedia Graphics and others. These mutual funds also had exposure in top line software companies such as Infosys, Wipro, NIIT and Satyam Computers. These stocks too declined in value, but the fall was much lower compared to that of the momentum stocks.

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