I read this somewhere. IT based mutual funds have done extremely well during the last 1 year. I was also looking at whether it is really good to invest in an IT related mutual fund.
After the recession, major IT bigwigs in India started posting good numbers. Does that mean the IT index is a good investment choice? Not certainly. There is more reason than logic behind this comment. Could you guess why?
Indian IT Industry is currently dominated by three major companies namely, TCS, Infosys and WIPRO. Whether the index falls or gains is almost always decided by the share price of these companies. That is the amount of market share these companies enjoy. You can be pretty sure that if the shares of any of these companies take a hit, the IT index is sure to witness a fall. So in such a scenario, where a handful of companies command the entire vertical, does it make any good idea to invest in an IT fund?
Instead, consider investing in the stocks of these companies directly. I believe that should be the better way and also the one which makes more sense. You will enjoy double benefit, an investment in the IT vertical and also the shares of some hot blue chip companies.
