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Should you invest in Technology funds now?

Nikhil Desai
/ Categories: DSIJ Mindshare, Mutual Fund
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The Information technology(IT) sector funds look to be back on track after two years of immense underperformance. These funds have returned nearly around ~31 per cent in the last one year. Some of the market experts expect continued outperformance of these funds in upcoming years, whereas some are doubtful of the long-term outperformance.

One of the primary reason behind the technology sector funds outperformance is the attractive valuations. Where in the current market other sectors and market caps are over-valued, IT sector stocks seems to be undervalued which gives an opportunity for value investing. The major players from the sector are recovering the earnings growth. This coupled with the valuations pushing the IT sector stocks and thereby IT funds.

After a bad phase of last 2 years, the technological development and short-term rupee depreciation helped the sector to reap returns. But still the question remains into the mind, should you invest in the IT sector fund now?

Considering current macro-economic conditions risk of strict visa norms and rupee appreciation remains the same. Keeping this in a mind it is better to be wise while investing in the technology funds. The IT funds are high risk funds, so even if the sector outlook seems good for at least one year with the attractive valuations and growth in earnings. However according to us major exposure to IT funds for now will be a risk play, minimum asset allocation for the shorter term will be favourable but in a longer run with the complex macro economical factors these funds could hurt your investment returns.


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