The Hindu Business Line : Fund Talk

I purchased units of PruICICI Technology Fund and SBI IT Fund in February 2000 and have suffered losses on both. I invested Rs.60,000 in PrucICICI Technology and Rs.30,000 in SBI IT Fund. Should I sell them at current NAV or hold for one year to recover my capital?

P. C. Agarwala, Meerut

Unfortunately, you have entered the IT sector-specific funds at a time when valuation levels were at their peak. As you state that recouping your initial investment is your objective, the best course of action is to sell your units and switch to diversified balanced or equity funds with a good long-term track record. Such funds may improve your chances of recovering your investment as compared to a sector-specific fund and also expose you to lower risks.

Diversified funds also carry downside risks, especially after the sharp run up in equity prices over the past nine months. But you can reduce these risks by phasing out your investments over a period of say, one year.

It may also be prudent to stick only to equity funds which have a good five-year track record across bull and bear markets.

In our view, funds such as Franklin India Bluechip Fund, Templeton India Growth Fund and HDFC Equity Fund appear to be superior investment options.

If you are looking for options with a lower risk profile (but with a possibility of lower returns), consider adding balanced funds such as HDFC Prudence and Templeton India Pension Fund.

A debt fund may not be a good option to recoup your initial investment as annual returns may be in the range of 5.5 per cent to 6.0 per cent over at least the next year or two.

(Queries may be e-mailed to mf@thehindu.co.in, or sent by post to Business Line Research Bureau, 859/860 Anna Salai, Chennai 600002.)

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