The correction in prices of infotech stocks over the period Jan 5-7 has resulted in a sharp decline in the net asset values (NAVs) of IT funds.

According to a report appearing in a leading financial daily, NAVs of IT funds have fallen 13.2% (on an average) in a matter of just three days (Jan 5-7).

Currently, there are four IT schemes in the industry - UTI Software Fund, Birla IT Fund (Apple Platinum Share), Kothari Pioneer IT Fund and SBI Magnum Sector Umbrella Fund IT. Of these all save UTI Software Fund have seen their NAVs plunge in response to the sharp fall in software stocks.

Kothari Pioneer IT Fund (the country's premier infotech fund) witnessed a 14.2% decline in both its plans. The Fund's fact sheet (as on 30th November 1999) reveals that the top three stocks in its portfolio include - Mastek, Infosys, and Satyam Computers. As market capitalisations of these stocks declined, the NAVs have mirrored this diminution.

Similarly, the SBI Magnum IT Fund witnessed the sharpest decline of 14.7% in its NAV largely due to substantial holdings in Infosys, Mastek and Visualsoft.

The Birla IT Fund NAV saw a decline of 11.3% in Plan A and 7.0% in Plan B. The fund portfolio is being restructured and therefore the decline in NAV can only partially be attributed to the dip in stock prices.

UTI IT Fund's NAV dipped only marginally although the reason was not apparent. Moreover, the latest portfolio status was also not available.

The decline in software stocks prices may not have come as a rude shock to fund managers as IT stocks were overheated and managers were expecting a correction in any case. Although IT funds may witness an outflow in the short run from jittery investors, the patient ones will continue to remain invested in these funds, given the enormous potential of the Indian IT sector. As a matter of fact, some investors may even take this opportunity to enter these funds at lower NAVs. Consequently, the net impact (of inflows and outflows) may be insignificant.

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