Despite correction, these mid- & small-cap technology stocks got picked by mutual funds
The past year has not been good for the Information Technology (IT) sector due to the fall in the US technology sector. But many mid-cap and small-cap IT stocks are now available at reasonable valuations after corrections. That has given an opportunity to fund managers to buy some of these stocks on the cheap.
The last one year has not been so good for the the information technology (IT) sector. So far in 2023, The S&P BSE TECk (TRI) Index has lost 5 percent, compared to the S&P BSE SENSEX (TRI) gaining 3 percent. Mutual fund schemes that invested predominantly in IT stocks too followed suit. Meeta Shetty, Fund Manager, Tata Mutual Fund, says, “IT sector has been underperforming the overall markets since last year due to increasing concerns of recession in the US market as well as sharp increase in interest rates. The recent incidents of fall-out of a couple of banks in the US has added to the concerns. The recent quarterly results and the commentary is also suggesting some caution from the managements. The near-term caution is warranted given that US remains one the largest IT services market globally. Additionally, the adoption of generative AI is also keenly watched as it could lead to some revenue cannibalisation”.
2/11
Most of the stocks in the IT sectors are cash-rich companies and are known for their strong balance sheets and healthy earnings growth. Many of them corrected significantly and are now available at reasonable valuations. Shetty of Tata MF believes Indian IT companies have consistently gained higher market share led by higher outsourcing. Selective IT companies have also shown resilience with favourable growth prospects in the recent period. On valuations, the sector is now trading closer to its long-term averages, which is comforting, Shetty adds. Here are the top midcap and smallcap IT stocks that active fund managers added afresh to their portfolios over the last three months. Portfolio data as of April 2023. Source: ACEMF.
3/11
Coforge M-CAP type: Mid-cap No. of active schemes that newly added the stock: 23 Total number of active schemes that hold the stock: 88 Sample of schemes that added afresh in their portfolio: Aditya Birla SL Focused Equity and Franklin India Technology Fund
4/11
Mphasis M-CAP type: Mid-cap No. of active schemes that newly added the stock: 17 Total number of active schemes that hold the stock: 91 Sample of schemes that added afresh in their portfolio: HDFC MNC and Bandhan Core Equity Fund
Sonata Software M-CAP type: Small-cap No. of active schemes that newly added the stock: 10 Total number of active schemes that hold the stock: 26 Sample of schemes that added afresh in their portfolio: Union Value Discovery and HSBC Equity Savings Fund
CE Info Systems M-CAP type: Small-cap No. of active schemes that newly added the stock: 6 Total number of active schemes that hold the stock: 18 Sample of schemes that added afresh in their portfolio: PGIM India Small Cap and Union Retirement Fund
7/11
Affle (India) M-CAP type: Small-cap No. of active schemes that newly added the stock: 5 Total number of active schemes that hold the stock: 28 Sample of schemes that added afresh in their portfolio: ITI Flexi Cap and ICICI Pru Business Cycle Fund
Zensar Technologies M-CAP type: Small-cap No. of active schemes that newly added the stock: 3 Total number of active schemes that hold the stock: 28 Sample of schemes that added afresh in their portfolio: Quant Quantamental and Franklin India Opportunities Fund
Mastek M-CAP type: Small-cap No. of active schemes that newly added the stock: 3 Total number of active schemes that hold the stock: 5 Sample of schemes that added afresh in their portfolio: ICICI Pru Retirement Fund-Pure Equity and ICICI Pru Midcap Fund
10/11
KPIT Technologies M-CAP type: Mid-cap No. of active schemes that newly added the stock: 2 Total number of active schemes that hold the stock: 30 Sample of schemes that added afresh in their portfolio: Baroda BNP Paribas Multi Cap and Union Small Cap Fund
11/11
Oracle Financial Services Software M-CAP type: Mid-cap No. of active schemes that newly added the stock: 2 Total number of active schemes that hold the stock: 28 Sample of schemes that added afresh in their portfolio: Shriram Flexi Cap and Shriram Balanced Advantage Fund
