Thursday market crash forces MFs to rejig equity portfolios
By Nisha Das | 16 Apr 2003
Mumbai: The Thursday stock market crash has forced the mutual fund managers to restructure their equity portfolios.
Most asset management companies (AMCs) with high exposure in technology stocks took a severe hammering as the stock market crashed in the aftermath of the lower-than expected guidance by tech major Infosys. Most tech funds crashed by anywhere between 10 and 16 per cent in a single day.
According to industry sources, the AMCs are now slowly switching their exposure from technology to other growth-oriented sectors such as pharmaceuticals and old economy or to the debt market.
Says Kotak Mahindra Mutual Fund equity fund manager Vetri Subramaniam: "After the Thursday's aftermath, the shift is bound to happen. Fund managers have to look at various options and if they find the tech sector not very positive at this point of time they will go to some safe sectors to balance the portfolios and improve their net asset values (NAVs)."
On last Thursday, Franklin Infotech lost around 16 per cent as its net asset value dipped to Rs 10.74. Other tech funds such as UTI Software Fund lost 15. 6 per cent, while Kotak Mahindra MF's K-tech was down 15 per cent as its NAV plunged below Rs 2.5. SBI IT Fund was also down by 14 per cent.
A senior official with HDFC MF says the fund managers have started to restructure their equity portfolios and are now looking at those sector which can give better returns. "Sectoral funds are always more risky than normal equity funds. But, now the focus may shift to more balanced funds where fund managers can hedge their risks."
Equity funds with diversified equity portfolios managed to survive the Thursday crash. While the Sensex lost 3.4 per cent, the NAVs of most diversified equity funds like Zurich India Equity, Alliance Capital and Sun F&C lost only 0.5 to 2 per cent.
Says a senior Unit Trust of India official: "It is too early for fund managers to switch their tech portfolios to other sectors. The Infosys stock is still on a growth path. There is no need to panic based on the future guidance by only one company. The IT stocks have been delivering good returns to the MF industry during the past few years."
