Technology mutual funds have plummeted to their new lows every day for the last year, making the entire sector untrustworthy and nonlucrative. Tech mutual funds contain tech companies and the majority of the share is occupied by tech companies in allocation. TCS, WIPRO, Infosys, and HCL have fallen 11.66%, 33%, 15%, and respectively 5.75%. But this was not the scenario when covid broke out. In fact, from 2020 to 2021 most of the midcap and small-cap IT stocks like Persistent Systems, Mindtree, and some others have crossed 100% which made the entire IT sector a lucrative loot.
When Covid broke out, we were locked in our homes, and where Our online lives have become our only lives. Internet usage has skyrocketed to a level that companies bulk-hired huge packages to manage their demand.
NASDAQ comprises the majority of tech companies fell by almost 30% making it one of the worst-performing indexes in the United States.
The fears of recession and increases in interest rates are making the market terrible, especially the tech sector. Inflation may ease a little bit but has not ended in the United States till now. Experts are predicting that the worst is yet to come in 2023.
Why are Indian Technology mutual funds falling
Indian technology companies dominate US clients, which is the primary reason for this destruction. These companies generate a large amount of revenue from other countries, especially from the United States. So, even if it is not a problem with India, India has to face it. Since the entire fund is based on the tech sector, the tech mutual funds have to absorb the pain and gain.
If we look at the data of Technology mutual funds
|Mutual funds||yr returns (2018)|
|TATA Digital mutual fund||25.74|
|ICICI Pru Tech fund||19.60|
|Franklin Tech fund||12.67|
What is the current scenario with Technology Mutual Funds?
As I mentioned “The worst is yet to come in 2023” by experts, the prediction can be quite difficult as to whether the Tech sector stock will perform well or remain as usual by absorbing more pain. Google has recently laid off 12,000 employees from their global workforce with immediate effect, Amazon is planning to cut jobs across its business operation, Goldman Sachs has also laid off 3000+ employees recently, and many more are on their way ahead. The Tech industry is still facing a lot of challenges when it comes to getting new clients or advancing in research.
With the use of AI, corporates are downsizing their employee count because the could that 10 employees can finish will now happen with just 2 or 3 using the ChatGPT.
In fact, HCL CEO C Vijay Kumar said that Growth is lower-end guidance due to macro challenges.
Is it good to proceed with our investment in Technology mutual funds still?
This answer will be a big “no”
I will try to withhold my answer with a few pieces of evidence.
Since last year if we look at some of the Technology mutual funds’ performance
|TATA Digital Mutual fund||– 16.56% in the last year|
|ICICI Pru Tech fund||– 17.18% in the last year|
|Franklin India Technology fund||– 16.73% in the last year|
|SBI Technology Fund||– 7.94% in the last year|
Remember the worst is yet to come.
In fact, from the starting month in 2023 itself, we are seeing huge layoffs from large MNCs with a large number. This can even go longer if the negative sentiment still circulates.
If you are still wanted to invest in Technology mutual funds then try to decrease the SIP amount to as low as possible at least for the first half of 2023.