These IT small-caps shrug off corrections to stay mutual fund darlings

Information technology stocks have underperformed so far this year on fears of recession in the US. But many fund houses continue to hold these stocks, and have even bought more, believing these are available at attractive valuations

IT small-caps

Year 2022 so far has brought bad news for the information technology (IT) sector, due to fears of recession in the US. The Nifty IT (TRI) index has lost 21 percent so far this year, compared to the Nifty 50 (TRI) gaining 5 percent. Mutual fund (MF) schemes that invested predominantly in IT stocks too followed suit, delivering an average negative return of 18 percent. Most of the stocks in the IT sectors are cash-rich companies and known for their strong balance sheets and healthy earnings growth. Many of them corrected significantly and are now available at reasonable valuations. Selective small-sized IT companies have also showed resilience with favourable growth prospects in the recent period. Here are the top small-cap IT stocks that active MF schemes preferred to hold in their portfolios as of July 31, 2022. (Data source: ACEMF)

Birlasoft
Total number of schemes holding the stock: 41
Market value of the investment: Rs 1,584 crore
Actively managed equity schemes that had notable exposure in the small-cap IT stock as of July 31, 2022 include Axis Small Cap, ICICI Pru Smallcap, IDFC Emerging Businesses and PGIM India Small Cap.

Cyient
Total number of schemes holding the stock: 40
Market value of the investment: Rs 2,052 crore
Aditya Birla SL Digital India, Franklin India Technology, ICICI Pru Smallcap, DSP Small Cap and Kotak Small Cap were few schemes that allocated significantly to the stock.

KPIT Technologies
Total number of schemes holding the stock: 24
Market value of the investment: Rs 1,246 crore
Few schemes that invested notably in the stock include Sundaram Small Cap, Franklin India Smaller Cos, PGIM India Small Cap and Nippon India Small Cap.

eClerx Services
Total number of schemes holding the stock: 23
Market value of the investment: Rs 1,392 crore
HDFC Small Cap, L&T Focused Equity, ITI Small Cap and DSP Small Cap were some of the schemes that allocated significantly to the stock

Zensar Technologies
Total number of schemes holding the stock: 23
Market value of the investment: Rs 684 crore
Schemes such as IDFC Emerging Businesses, ICICI Pru Smallcap, ICICI Pru Dividend Yield Equity, IDFC Multi Cap and Nippon India Flexi Cap made allocation to the stock as of July 2022.

Affle (India)
Total number of schemes holding the stock: 20
Market value of the investment: Rs 729 crore
Few schemes that invested notably in the stock include Franklin India Opportunities, Franklin India Technology, Nippon India Focused Equity and UTI Small Cap fund.

Firstsource Solutions
Total number of schemes holding the stock: 20
Market value of the investment: Rs 918 crore
HDFC Small Cap, Kotak Multicap, UTI Small Cap and UTI Core Equity were few schemes that allocated significantly to the stock.

Sonata Software
Total number of schemes holding the stock: 14
Market value of the investment: Rs 988 crore
Schemes such as HDFC Small Cap, L&T Emerging Businesses, Aditya Birla SL Digital India and HDFC Children’s Gift Fund made allocation to the stock as of July 2022.

Just Dial
Total number of schemes holding the stock: 8
Market value of the investment: Rs 276 crore
Few schemes that invested notably in the stock include Quant Value, Nippon India Small Cap and DSP Midcap fund.

Newgen Software Technologies
Total number of schemes holding the stock: 6
Market value of the investment: Rs 96 crore
PGIM India ELSS Tax Saver, HDFC Children’s Gift and PGIM India Small Cap fund are few schemes that allocated significantly to the stock.

NIIT
Total number of schemes holding the stock: 5
Market value of the investment: Rs 387 crore
Schemes such as Nippon India Small Cap, Union Value Discovery, Union Small Cap and ICICI Pru ESG made allocation to the stock as of July 2022.

Intellect Design Arena
Total number of schemes holding the stock: 4
Market value of the investment: Rs 117 crore
Some of the schemes that invested notably in the stock include ITI Small Cap, Nippon India Value and Nippon India Small Cap fund.

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