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Some funds take shelter in cash

Aabhas Pandya

To escape the tech carnage, few tech funds have accepted the last resort -- to remain in cash. "Call it the cash shelter!" Technology stocks have plunged to abysmal levels but investors in Tata IT Sector Fund are not complaining. It is no different for unitholders in Birla IT and Chola Freedom Technology. Well, courtesy the high cash exposures, investors in the three funds are smiling amidst a widespread gloom. Even as most fund managers waited for an elusive turnaround in the tech sector and stayed almost fully invested, Tata IT fund managers were assiduously knitting a survival strategy around a high cash component. Ditto for Chola Freedom, which went into an overdrive with its money market investments since the beginning of the current calendar.

Thus, on Black Wednesday (April 11), when most tech funds simply caved in, Tata IT shed a mere 10 paise or 1.36 per cent with its NAV settling at Rs 6.91. The fund had a whopping 83 per cent in money markets on March 31, 2001. In other words, it was sitting on a cash pile of nearly Rs 200 million while the top holding of MTNL had an investment of mere Rs 8.3 million. However, it is not just prudent management from the AMC. Tata IT was also very lucky to receive fresh investments of around Rs 100 million in February. With the fund manager abstaining from investing inflows, the cash component got a boost and has provided a cushion to the NAV in a falling market.

"We took pre-emptive measures by steadily reducing our equity holdings across all schemes and thereby creating cash to invest at the appropriate time. We will be steadily investing over the next few weeks in stocks, which show good valuations and growth prospects over time," says Aspi T Contractor, CIO, Tata Asset management Company.

Chola Freedom Technology too hiked its money market investments from 37 per cent in January to over 56 per cent on March 31. The guarded investment has reaped rewards with the fund dropping just 4.6 per cent on April 11. In the last one month, the fund has shed only 17.8 per cent against the category loss of 24 per cent. "We will continue to maintain our defensive investment strategy and stay away from mid and small cap tech stocks while adding more of quality stocks," says Aniket Inamdar at Cholamandalam Cazenove AMC.

It is no different with Birla IT, which aggressively offloaded stocks in February and pumped up investments in money markets to a whopping 63 per cent Rs 250 million. The strategy has helped stem the slide, besides giving it the opportunity to buy top-tier stocks at throw away prices.

On the other hand, KP Internet Opportunities has been a contrarian of sorts. Despite cash holdings of just 7 per cent and a 16 per cent exposure to Infosys, the fund dipped only 6.8 per cent on Wednesday. This is attributed to the fund's diversified bundle of top holdings, spread across HDFC, HDFC Bank, Bank of Madura, Reliance Industries and Mahindra and Mahindra.

"Cash(ing) on Crash!!

Fund	Cash Holding (%)	One-day Loss (%)
Tata IT	83	-1.36
Birla IT	63.37	-4.06
Chola Freedom Technology	56.11	-4.67
IL&FS eCOM Fund	16.88	-8.33
KP Infotech	15.05	-11.03
Pru ICICI Technology	11.44	-7.82
DSPML Technology.com	11.26	-9.89
Alliance New Millenium	10.77	-10.42
Magnum IT	9.69	-9.77
K Tech	8.61	-10.03
KP Internet Opportunities Fund	7.03	-6.84

Source: Value Research

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