Still, it may take time for investors to recover their nerve to invest in the IT sector. Last year, nine IT funds collected nearly Rs 2,400 crore from investors accounting for 37 per cent of total mutual fund inflows in the first quarter of 2000. That amount now has been eroded by 26 per cent on the back of the selloff on the tech-laden Nasdaq, which has came off by 52 per cent from its March 10 peak of 5,132.52 points after lofty valuations in the tech sector proved unsustainable. Among IT funds, the Birla IT growth fund fared worst with a negative return of almost 50 per cent. The best performer among IT funds was the UTI software fund which posted a negative 29.83 per cent return.
Some analysts believe that investing in sector funds contradicts the purpose of a mutual fund.
Overall, the pain has been relatively less for investors in state-run mutual funds. Most of their NAVs fell last year by a smaller amount than those of private sector mutual funds. The Unit Trust of India services sector fund emerged top of the heap among the 31 state-run funds with a return of 37.4 per cent. They were second best overall behind privately run J.M. Basic Fund, which invests only in petroleum and petrochemical stocks. But all was not well for the Magnum series of funds managed by the State Bank of India funds management.