Technology sector funds are equity funds that invest in businesses involved in providing technological services or products, such as computer software, hardware, and information technology.
Why invest in technology funds?
Technology mutual funds can give you access and exposure to several technology stocks that too in just one fund. Technology funds have been fairly popular in terms of investment prospects in recent years.
As per an August 2020 report by The Hindu BusinessLine, a financial newspaper, the revenue generated by this sector has been growing at 7.7% on a year-on-year basis. By 2025, revenue generated by the IT sector is expected to reach $350 billion.
According to various news reports by leading national and international publications, the pandemic saw a boom in stocks market in tech industry, in India and worldwide.
Performance of technology sector funds in the last 5 years
Source – Investica.com
Some top-performing technology sector funds have been SBI Technologies Opportunities Fund, ICICI Prudential Technology Fund, Franklin India Technology Fund, Aditya Birla Sun Life Digital India Fund, and TATA Digital India Fund. Over five years, technology funds in India have delivered an annualised return of 14 to 19 per cent. This average return makes for a good diversification option for investors who want to profit from the rising technological sector in India.
If you’re a novice, there are two ways in which you can put your investment in technology funds. The first is domestic sector funds and the second is Exchange Traded Funds/international funds. If you invest in international funds, you’ll be exposed to investing in companies like Alphabet, Intel, Microsoft, Netflix and others.
Technology sector update
Exports to banking and financial services, retail, and other industries account for the majority of revenue for Indian IT enterprises. If these U.S. enterprises fail, it could have a huge impact on the revenues of Indian IT exporters.
Companies in the United States are spending more on software services and digitalisation because of factors such as corporate tax cuts, resulting in stronger cash flows, which have helped Indian IT firms so far.
Are tech sector funds for you?
Although technology sector funds tend to be profitable, there is a factor of high risk. On an average, currently, 77.01% of technology sector funds hold stocks of some of India’s most reputed companies like HCL, TCS, Infosys, Tech Mahindra and Wipro.
If you invest in technology funds, be sure to take the risk involved into consideration. You can approach investing via the SIP route, a staggered yet promising way for you to ride India’s tech wave.