Top mutual fund managers are betting on IT and pharma sector. Should you?

October 24, Tuesday

Sophisticated mutual fund managers are convinced that there is value in technology and pharma sectors. These two sectors have undergone hard phase for the last three years. As soon as pharma fund category has returned -10.08 per cent in the last one year, technology has coped to offer a decent 7.48 per cent during the same period. Still, the top fund managers like Prashant Jain, CIO, HDFC Mutual Fund, and S Naren, CIO-equities, ICICI Prudential Mutual Fund, believe in these sectors. They were speaking at the Morning Star Investment Conference.
S Naren claimed that technology and pharma sectors present afford a lot of chances. "Technology and pharma are not absolutely cheap. It is a contrarian choice at this point. Decent stocks from these sectors are a good bet at this point," he said.
The technology and pharma sector have been affected badly since the last three years. Pharma sector is damaged by the FDA compliance issue in the USA and the Indian government wish to de-brand medicine, while the IT sector undergoing is determined mainly by faded global economy. The threat to H1B visas in the USA may cut down on the Indian IT sector badly.
Nevertheless, Prashant Jain still won't consider the technology sector as a rival. He is convinced that the sector has value. "Technology is a globally sustainable sector”. In his opinion the sector payouts are high and the only challenge is low growth rates are. “The sector has reasonable risk reward," said Jain.
Anyway, he is assured that portfolio managers shouldn't cut it too fat with the sector. "Neutral exposure to technology sector might be a good idea," Prashant Jain added.
Neeraj Chauhan, CEO, The Financial Mall, says that surely there is anticipation of an upgrowth in these sectors but one has to take it slow to realise the value. Although the prospects of further going down are slim still there’s no supreme confidence in the uptick. And no one can say whether they will bounce back in two years or five years says Neeraj Chauhan.
In Chauhan’s view, investors should assign some money to these sectors for long term growth but don't set great store in a short time. He says that investors’ main problem is the rush of funds performing overnight, but in this case it is not possible. Investors should bet on these sectors only if they have the risk appetite and at least five to seven years to invest, Chauhan advises.
We wouldn’t recommend sector funds to regular investors. We think that investors should deal with those sectors that they are proficient in. It is very crucial to time the entry and exit in these schemes. A common investor would not cope with that.