IT sector funds have been feeling the pinch for the last one year or so. These sector funds have lost 7.53% in three months, 1.93% in one. However, the IT fund category was up 2.74% in one week. Many investors, especially those who got into IT funds in the covid years, are extremely nervous about their investments.
Many investors and investment experts believed at that time that the technology sector may remain an evergreen sector in the post-covid era as the world moves towards an online mode. The technology sector boomed in the two years after covid disrupted the world. However, the sector started faltering after easy money conditions started disappearing. Higher rates, runaway inflation, IT spending cuts, and talk of recession took the life out of the sector. The conditions are likely to continue for some months. However, many analysts believe that things might turn around in the near future. Already there is the talk of Fed pausing rate hikes and possible rate cuts in the next year. Once things start stabilising, the IT sector may recover its mojo.
Don’t think this all crystal ball gazing. Look at the returns offered by these schemes over a long period of time. In 10 years these schemes offered around 14-19%. We are talking about 10-year SIP returns here. Not point to point number games. Even in the five-year period, SIPs in IT funds offered around 14-20%. The IT category offered around 32% in the last 10 years. It offered 18-19% in five and 10 years. ICICI Prudential Technology Fund, the topper in the category, offered around 21% in the last 10 years. The schemes offered around 37% in the last three years.
The point we are trying to make is: don’t give up on IT sector funds. They will deliver superior returns over a long period. However, you should always remember that the IT sector or any other sector is risky and cyclical. They become volatile during bleak phases. So invest only a small percentage of your total portfolio in these schemes to pocket extra returns, most mutual fund managers and advisors ask investors not to go overboard and invest only 10-20% of their portfolio in IT schemes.
