The meltdown in the stock markets over the past few months has had its effect on growth funds. And supposedly diversified growth funds that have turned quasi-tech funds have been hit a lot more harder.

Open-ended Growth Schemes	NAV (Rs)	Last week	Last month	Last year	Since inception
UTI Sector Fund - Petroleum	11.8	3.3%	4.2%	0.0%	17.2%
GIC Growth Plus II	17.3	1.4%	-4.4%	92.0%	10.9%
Taurus Starshare	8.4	0.6%	-6.7%	24.6%	-3.8%
Alliance Basic Ind. Fund (Gr)	8.0	-0.5%	-5.7%	0.0%	-10.5%
Zurich India Capital Builder	11.7	-1.1%	-4.0%	1.5%	3.5%
K MNC	9.4	-1.3%	0.0%	0.0%	-0.1%
Magnum Sector Funds - Contra	8.1	-1.5%	-2.2%	0.0%	-20.0%
IL&FS Growth & Value (Ann Div)	11.5	-1.6%	-6.3%	0.0%	17.1%
Mastergrowth Unit Scheme 1993	15.9	-1.7%	-8.0%	5.7%	7.6%
Templeton Growth Fund	12.1	-1.7%	-4.0%	57.9%	8.6%
Canbonus	9.3	-2.0%	-11.8%	-13.2%	1.5%
GIC Fortune 1994	6.1	-2.4%	-6.6%	-2.4%	-8.1%
IL&FS Growth & Value Fund (Gr)	12.9	-2.8%	-12.4%	0.0%	6.5%
Zurich India Top 200	15.1	-3.0%	-6.5%	3.9%	18.1%
Mastershare Plus 1991	20.1	-3.1%	-5.3%	-7.0%	4.0%
DSP ML Equity Fund	17.7	-3.5%	-13.3%	17.0%	29.8%
Libra Leap	17.6	-3.5%	-14.4%	86.5%	31.3%
Kothari Pioneer Prima Fund (Gr)	21.0	-3.7%	-12.3%	45.1%	12.2%
GIC D'MAT	7.9	-3.8%	-7.2%	0.0%	-31.9%
Reliance Vision Fund	18.2	-3.8%	-8.5%	32.5%	13.4%
DSP ML Opportunities (Gr)	8.5	-4.0%	0.0%	0.0%	-4.0%
Grandmaster 1993	8.3	-4.0%	-11.5%	-20.5%	-3.8%
Mastergain 1992	10.4	-4.2%	-6.2%	-4.4%	2.1%
Birla MNC Fund (Growth)	28.0	-4.4%	-5.9%	84.4%	20.3%
Primary Equity Fund	15.4	-4.5%	-9.5%	19.2%	8.8%
UTI Sector Fund - Brand Value	8.2	-4.5%	-14.3%	0.0%	-14.6%
Sundaram Growth Fund	12.8	-4.6%	-12.5%	27.6%	22.0%
Zurich India Equity (Gr)	19.1	-4.7%	-8.9%	51.5%	13.9%
Kothari Pioneer Bluechip (Gr)	21.4	-5.0%	-10.4%	60.2%	29.8%
Sun F & C Value Fund (Gr)	20.2	-5.1%	-11.6%	21.4%	32.2%
Pru ICICI Growth Plan (Gr)	20.4	-5.1%	-16.5%	47.6%	44.4%
Magnum Equity Fund	13.5	-5.3%	-17.8%	48.6%	15.3%
UGS 10000	10.7	-6.2%	-8.2%	-14.0%	4.5%
Alliance Buy India Fund Fund (Gr)	5.8	-6.3%	-15.3%	0.0%	-42.0%
Kothari Pioneer Prima Plus (Gr)	21.8	-6.4%	-11.0%	56.0%	16.9%
Magnum Global Fund	10.6	-6.6%	-17.3%	26.5%	3.1%
Magnum Multiplier Plus 1993	16.9	-7.6%	-23.7%	23.6%	9.0%
Tata Life Sc & Tech. Fund (I)	11.3	-7.9%	-11.9%	0.0%	24.9%
UTI Sector Fund - Service Sector	26.2	-8.1%	-17.1%	0.0%	162.1%
Tata Pure Equity Fund	11.6	-8.2%	-13.1%	46.4%	45.9%
K 30	17.4	-8.6%	-15.8%	38.1%	43.4%
Alliance Equity Fund (Gr)	31.8	-8.7%	-16.1%	89.9%	93.1%
Birla Advantage Fund	37.4	-9.1%	-13.4%	83.1%	35.3%
JM Equity Fund (Gr)	9.7	-9.5%	-21.7%	-11.2%	0.1%
Canexpo	17.0	-9.8%	-16.9%	38.8%	10.2%
ING Growth Portfolio (Gr.)	15.2	-10.0%	-27.1%	54.1%	52.0%

The huge correction in technology, media, telecom (TMT) stocks has pulled down the net asset values (NAVs) of technology funds. But that is understandable, and investors can't really fault the fund managers. A technology fund will invest in TMT stocks and investing anywhere other these stocks will defeat the very objective of a technology fund. But why should the fall in TMT stocks pull down growth funds. Aren't growth funds supposed to be diversified enough to offer investors a hedge against the meltdown in a couple of sectors? Isn't diversification supposed to be the biggest ace in a fund manager's arsenal to hedge against a falling market? It is meant to be, but unfortunately it isn't.

In their enthusiasm to duplicate last year's performance, fund managers have been guilty of taking an unwarranted exposure to TMT stocks. In many cases as much as half of the fund's net assets are locked in TMT stocks. And even within the TMT sectors there has been poor diversification, with a handful of stocks (Satyam, Infosys, Zee Tele, Global Tele) accounting for a chunk of TMT investments. So a crash in the prices of these stocks has pulled down the fund significantly.

However, industry sources are divided on whether it is the fund manager at fault or the investor. In an interview to personalfn.com, Mr S. V. Prasad (President, Zurich Asset Management (I) P. Ltd.) remarked that taking such a large exposure to software stocks is imprudent and could prove disastrous in the long run (as is more than evident now). However, in another interview to personalfn.com, A. P. Kurian (Chairman, Association of Mutual Funds in India) held the view that being a growth fund with capital appreciation as its objective, a fund manager could invest in stocks regardless of the sector to realise the investment objective and the investor must know what he is getting into before he invests in such a fund.

So who is at fault? Wish there was a third umpire!

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