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Funds still wedded to IT stocks

Nilanjan Dey

GOD proposes, and the market disposes. Funds, by now, have learnt to live with this fact of life, even as they try to come to terms with the factoid that stock market volatility has frightened many investors.

MFs are betting their money on recent bouts of investments by FIIs and low prices that generally prevail in the market. Equity funds, in particular, are advising investors not to time the market, and stay invested till things turn for the better. Indeed, they are urging clients to buy more in order to take advantage of good valuations.

There has been no change in MFs' stance on IT stocks. If anything, they have reiterated their commitment to IT, based on recent results, demand for outsourcing of IT inputs from abroad and projected revenues. The latest numbers released by Nasscom, incid entally, indicate significant advancement by the software sector.

However, their tendency to pick up stakes in unlisted, but promising technology companies seems to have ebbed. Further, there are signs that funds are gradually exiting certain tech investments they had made earlier.

A section of MFs is also looking at using their cash chests to buy choicest old-economy counters that are expected to post major gains in the medium term.

MFs have noted the recent action (read value-based buying) in select pharma and telecom stocks. It is to be seen how pharma funds are influenced by such action in terms of changes in their NAVs.

Inflows from SBI's IMD issue are expected to create a plus situation on the liquidity front. Already, debt fund managers are referring to the recent firming up of bond prices. They, however, expect the Government to sterilise the situation. Funds would, perhaps, like the central bank to squirrel part of the inflows by issuing more Government securities.

With liquidity in for a booster, interest rates are likely to be reined in, at least for the next couple of months. The last few days have seen call rates remaining stable. The call market is not expected to shift drastically this way or that. MFs would be keen to see whether international oil prices are still determining things in India.

Funds are also monitoring movements of the rupee and the somewhat weak foreign exchange scenario. There has been an increased demand for dollar in the local market as the US currency has strengthened vis-a-vis softer currencies in Asian markets, it is no ted.

On the news front, JM MF is inching closer to launching its ethical fund. JM Basic, its close-ended scheme focussing on the petro sector, is also in for significant changes. No major launches by other players are in the horizon at the moment. Sundaram Ne wton MF's initiative to tutor investors deserves mention.

Meanwhile, trends in transactions by MFs for the month (up to November 9) suggest that gross purchases of equity funds were less than gross sales by Rs 70.24 crore. Gross purchases of debt funds, however, were more than gross sales by Rs 302.64 crore.

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