Funds investing in technology sector delivered the highest average returns of nearly 38 percent in the one year period ended April 16, according to mutual fund research firm, Value Research.
In comparison, Nifty IT index rose 30.22 percent during the period under review.
Schemes investing in another defensive sector, Fast Moving Consumer Goods (FMCG) stood at the second spot delivering 25 percent average returns, while smallcap funds category gave 22 percent average returns in the last one year.
Market experts said that the defensive nature of the IT sector helped the category’s average returns to rise.
Gopal Agarwal, Chief Investment Officer at Tata Mutual Fund said, “Generally, the IT sector tends to do well during market turbulence. This coupled with weakening macros, rupee depreciation and robust earnings by IT companies have pushed the sector up in last one year.”
After rising 23 percent since the start of this year to its all-time high of 36,444 on January 29, 2018, the S&P BSE Sensex has fallen to 34,399 now.
“In calendar year 2017, the sector was struggling and it had underperformed last year so now the sector looks good,” Agarwal said.
The IT sector was struggling since there was a debate against H1B visas in the United States of America. This hit the basic structure of Indian IT industry. IT bellwether Infosys also went through a bad phase during the same time.
Another reason for the fall in IT was the appreciation of Indian currency in the last three years and strong macros. IT, being an export-based sector, was impacted badly by the rupee appreciation.
However, the sector seems to have overcome these negative factors.
Fund managers believe that sector has regained its form. “The primary reason for the sector to do well is because other sectors have not done that well or have done badly recently,” a fund manager from a private fund house said.
Among 10 IT technology funds that industry offers, the top 3 funds were Tata Digital India Fund that returned 43.78 percent in the last one year. Aditya Birla Sun Life New Millenium Fund and ICICI Prudential Technology Fund fetched 41.75 percent and 36.50 percent, average returns, respectively.
Among 11 categories in equity funds, schemes investing in the defensive pharma sector was the only category to deliver negative returns in the last one year. This category gave negative average returns of 4.5 percent.
According to asset managers, the sector has been dealing with increased scrutiny from the USFDA (Food & Drug Administration), and domestic disruption following the introduction of the Goods and Services Tax.