Have a high risk appetite? Just hold on to IT funds, say analysts

Investors with low to moderate tolerance must stand by diversified funds

After fetching sound returns since 2017, technology (tech) sector funds are witnessing steep corrections. The category has declined 15.5 per cent year-to-date.  

High valuations, failing sentiment

Valuations of information technology (IT) stocks had expanded significantly between March 2020 and December 2021.

“Stocks within the sector used to trade at multiples of 18x to 20x. They rose as high as 30x, and in the case of some mid-cap stocks, above 40x. Such expansion in valuations produced phenomenal returns, and led to profit-taking by investors,” says Meeta Shetty, senior analyst and fund manager, Tata Mutual Fund.

Currently, the stock market sentiment is