Software stocks have been a major beneficiary of the 260+ point rise in the BSE Sensex in the 3 days of the previous week. IT funds that had been languishing until then, seemed to have crawled back in the reckoning.

The markets seemed to have taken a fancy (for the umpteenth time) to technology, media, telecom (TMT) counters and this has spurred stocks like Infosys, Satyam, Mastek, Hughes Software, Zee Telefilms, Global Tele. And guess what  most mutual funds have these stocks in their portfolios. So we have witnessed IT funds net asset values (NAV) shooting up in the last week.

Open-ended IT Schemes	NAV (Rs)	Last week	Last month	Last year	Since inception
IL&FS eCOM Fund (Gr)	6.27	25.30%	7.00%	0.00%	-50.60%
Alliance New Millenn (Gr)	8.15	25.30%	5.70%	0.00%	-43.00%
UTI Sector- Software	21.27	23.40%	3.70%	0.00%	74.70%
Magnum Sector Funds-IT	14.35	23.40%	-3.00%	0.00%	115.50%
DSP ML Tech.com (Gr)	8.56	21.10%	0.00%	0.00%	7.50%
Birla IT Fund (Gr)	19.92	18.70%	0.50%	96.20%	16.80%
Pru ICICI Tech. (Gr)	5.68	18.30%	-0.20%	0.00%	-38.80%
K P Infotech (Gr)	27.12	17.80%	-1.70%	202.60%	176.60%
Tata IT Sector Fund	11.63	17.30%	4.40%	114.60%	27.10%
Chola Freedom Tech (Cum)	15.46	16.80%	0.90%	25.90%	21.80%
K Tech	7.49	15.10%	0.70%	0.00%	0.10%
K P Internet Opport.(Gr)	7.95	13.00%	1.00%	0.00%	-13.20%
Sun F&C Emerg Tech (Gr)	7.00	12.50%	0.00%	0.00%	-15.80%

This is good news for IT fund investors, who haven't seen growth of this magnitude in a while. However, that is not to say that the IT party has started once again and fund investors can leave all their worries behind. This may turn out to be another flash-in-the-pan rally. No one's willing to comment on the surge in prices and there are no signs of any consensus. The rally is very short and we maintain our stand on IT funds i.e. there is yet too much uncertainty in TMT stocks and entry at current levels is not advisable. A balanced fund with under 30% exposure to TMT stocks or a FMCG fund are better options for investors looking for steady growth and lower volatility.

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