Investors sitting on sidelines hop on to the tech train

Aabhas Pandya

Technology funds have a reason to cheer in a turbulent market as new investors jump on to the technology bandwagon. Despite being badly mauled in a sustained bearish phase, technology funds have witnessed net inflows in the last few months. As on July 31, 2000, six technology funds (excluding IL&FS e-COM) have seen their combined unit capital go up by Rs 676.5 million. However, the actual inflow in most of these funds will be lower since net asset values (NAV) have remained below par since inception.

If asset management companies (AMCs) are aggressively wooing fresh money in technology funds at ''attractive" levels, investors too are finding merit in these funds at sub-par levels. While the inflows are minuscule in comparison to what we saw earlier this year, the signals are nonetheless encouraging as they suggest the maturing of the Indian investor. As many as seven technology funds were launched earlier this year amidst tech mania and garnered over Rs 22 billion. Currently, the net asset values of all the technology funds are below par with average erosion of 24.5 per cent on August 22, 2000.

Alliance Capital was first off the block with a technology fund in December last year and mobilised Rs 5.4 billion. Based on its size of Rs 4.6 billion on July 31, 2000 and NAV of Rs 7.76, the fund's unit capital (product of number of units and initial offer price of Rs 10) has moved up by Rs 53 crore to Rs 5.93 billion.

"We have witnessed good amount of inflows in Alliance New Millennium. We have been telling our investors and distributors that this is a good time to buy. While some investors are putting money to average out their initial cost, we have another set of investors who had missed the initial offer," says an official at Alliance Capital, who did not wish to be quoted.

It is an irony of sorts at Prudential ICICI Technology Fund. The worst hit among the technology funds with a 41.5 percent fall in NAV, Prudential Technology has received the maximum inflows with its unit capital moving up from Rs 5 billion to Rs 5.54 billion. "In the last couple of months, retail applications have moved up sharply with investors putting Rs 10,000-15,000 in our technology fund. In fact, the technology fund has sold the most during this period. With a quality portfolio available at such attractive NAVs, it is like a 'sale' of technology funds,'' says Sumeet Vaid at Prudential ICICI Mutual Fund. The same is the case with DSPML Technology.com, which has also seen net inflows.

However, not all is hunky dory with other technology funds, although none of the funds have witnessed a sizeable redemption. For instance, the Internet Opportunities Fund from Kothari Pioneer has seen its unit capital go down by Rs 236 million. In other words, the fund has faced a redemption of 23.6 million units, which is meagre in comparison to its mobilisation of Rs 5.55 billion in March this year. However, the actual outflow here will be less since the fund's NAV has consistently remained below par.

The net inflows can clearly be construed as the maturing of the Indian investor, who has taken a contrarian approach to log into technology funds. This clearly augurs well for the fund industry in particular and the equity markets in general.

RISING UNIT CAPITAL

Figures in Rs billion

Fund	Launch date	Initial size	April	May	June	July
Alliance New Millenium	Jan 15	5.40	5.75	5.86	5.92	5.93
DSPML Technology.com	Apr 10	0.52	-	0.47	0.47	0.59
K-Tech	Mar 21	2.18	-	-	2.39	2.15
KP Internet Opportunities	Feb 19	5.55	5.33	5.26	5.33	5.31
Pru ICICI Technology	Feb 5	5.00	5.27	5.35	5.56	5.54
Sun F&C Emerging Tech	Feb 24	2.28	-	-	2.09	2.08

Source: Value Research

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