The dramatic fall in the markets over the past few days has had a depressing effect on the net asset values (NAVs) of most funds, with software funds in particular being hit the hardest. With the way the market is behaving, it would be a brave investor who enters these funds at this stage.

Yesterday, the BSE Sensex fell by 291 points to close lower at 4,881 points. This is after the Sensex crashed by 258 points on 13th April 2000 to 5,169 points. The sustained decline in the Sensex driven by large-scale sell-offs in software stocks, has taken its toll on software funds. Software fund NAVs have been pummeled a long way, after posting some gains last week.

Given the current scenario, nervous investors will want to exit and fast. This will put considerable pressure on fund managers to offload stocks to meet these redemptions. We could be witnessing a replay of what happened less than 15 days ago, when fund managers were caught in a similar situation. Then some dividend stripping inflows, which is the bane of the industry, turned out to be a boon for fund managers. And interestingly, figures released by the market watchdog - Securities & Exchange Board of India (SEBI) reveal that fund managers actually bought shares, as opposed to selling.

As far as IT fund investors are concerned, nervousness and anxiety are understandable. Investors who find these funds at cheap prices may want to hold their horses for a few more days to make some sense out of the markets. As companies (both old and new economy) get ready to declare their results in the coming days, the picture may get a little more clearer.

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