Ever since the September 11th terrorist attack on USA, the global investment market has been under a spell. The American industry went into a freeze especially with any business deal with the International community. The war that followed also had a special significance on India since it involved Indo-Pak relations and the international oil price. All this had created a cloud of uncertainty in the Indian Investment market.

Even though the war in Afghanistan has not ended and there is a distinct possibility of some if not all the Talibans shift base to the POK, the fall of Kabul has brought the Afghan war to a decisive phase where the reconstruction of Afghanistan can begin. India will have a decisive part in this reconstruction process and funds for this reconstruction are expected to come from the UN and the international community. There will therefore be a new wave of opportunity for the Indian companies who have requisite skills and marketing ability. 

At the same time the Oil price crisis appears to have fizzled out and there appears to be a distinct possibility that the prices may come down in the next few weeks. Though the WTO meet in Doha did not go the way India wanted, there may not be any adverse impact on the Indian industry in the immediate future as a result of the WTO.

The  gain of over 600 points in the Sensex over the last two months and the closing of the Sensex at 3252 for the week ending November 24, 2001 confirms the view that the war concerns are now behind us.  It was significant that the uptrend was contributed mostly by the technology stocks such as Infosys and Wipro accompanied by significant volume. Investors should therefore start looking at the market with a little more seriousness than what they were doing in the recent past.
One of the biggest positive developments during the recent past  was however a renewed interest in the American market on the Indian software services. The leader of the pack Infosys saw its stocks surge on the rumour of a massive contract finalised in USA. The US markets are also looking up with encouraging year end sales predicted for Consumer goods. Even though the tech stocks in USA are  still subdued under the influence of the previous quarter results, the sentiments on Indian stocks have turned for the better.
Since the benefits of the turn around are likely to be felt more by the top few software companies, it is better for the investors to remain with the top counters. Alternatively it is advisable to focus on software funds that can give them indirect quality exposure in the software industry. According to data available,  NAVs of 12 technology funds have surged an average 19.38 percent since the start of November on the back of sustained buying. 
One Tech fund to be considered for investment in the current sceneario is the UTI software fund launched in May 1999. It is an open-ended growth fund with a committed 90 % investment in Software sector. The total corpus of the fund is about RS 164 crores. The scheme has declared dividend of 20 % for 1999-2000 and 22 % for 2000-2001. Present NAV is 6.96. The NAV was around 4.5 during the first week of October and has gained significantly during the last one month. In the last week the NAV gained by nearly 10 %. 

Amongst the dedicated software funds, UTI Software fund had the highest relative gain during the last week at 19.6 % close on the heels of the leader by Pioneer ITI Infotech at 21.8 % and Alliance New Millennium at 21.2 %.
 

The top 10 holdings of the Company comprising of 76 % of the fund’s holding consists of Infosys, Satyam and Zee Telefilms which appreciated substantially during the last two weeks and hold further promise in the coming days. 
 

Top Holdings of UTI Software Fund

Company	Holdings (%)
Infosys	21
Satyam	11
Zee Telefilms	9
Hughes Software	8
ITC	7
Wipro	5
NIIT	4
CMC	4
Sterilite	4
Polaris	3
Total	76

 

The units of this fund are available at an NAV of 6.96 without any entry load. The minimum investment is Rs 5000/-

In comparison to the Sensex, the fund gained over 8 % p.a. during the last fortnight indicating a healthy lead over the index performance. According to a majority of stock market observers, the Post Diwali sentiments in the market are indicative of a 30 % annualised growth for the Sensex in the next year. In the light of such a forecast, the UTI fund appears to be a good investment bet at the current NAV.

Na.Vijayashanakr
November 24, 2001