scorecardresearch With over 20% returns, Tata Digital India Fund stays at the top among

With over 20% returns, Tata Digital India Fund stays at the top among tech-themed schemes

Updated: 13 Jul 2022, 02:19 PM IST

Sectoral funds, especially, those catering to India’s technology theme have outperformed most other mutual funds in the past decade. Instead of studying individual technology stocks, you can safely invest in a technology fund wherein the fund house allocates the investments depending on myriad factors. 

TATA Digital India Fund continues to be a name to reckon with.

TATA Digital India Fund continues to be a name to reckon with.

How much many of us wish that money would grow on trees. Sadly, that does not happen. We have to earn, save and invest to create wealth and a corpus that would sustain our lifestyle after we retire. Expenses are skyrocketing, which means that the money saved today will lose its value tomorrow. That returns must be beyond the current inflation rate while being enough to meet future needs and leave behind a legacy for loved ones should be your aim while investing.

A cursory look through the returns of all mutual fund schemes underscores consistent performance by Tata Digital India fund with whopping assets under management (AUM) to the tune of 5433.80 crore. This fund has been classified as too risky owing to its focus on a single sector or theme. As the IT sector performed considerably well in the last few years creating wealth for many, those who invested in this fund were in for a pleasant surprise as they earned 201.29 per cent returns on this fund since its inception.

Benefiting from a roll in the IT sector

Shares of many IT companies touched record-breaking highs in 2021. This is before the market declined to give way to the long-awaited price and value corrections. However, this has deterred many IT sector companies from declaring profits. The recent quarterly results by many IT companies underscore the immense focus the Indian economy lays on its technology infrastructure. True that IT stock prices also fell under the impact of geopolitical tensions and subsequent inflation that seized the world stock markets too. 

However, their rapid fall was arrested with companies continuing to deliver on their projects and recruiting more employees for their new projects. Projected financial results will prompt the upcycle to continue for another five years and more.

Regular monthly investments of 10,000 since 2015 is now equivalent to 30,128.60. Ranked 18 out of the 131 large-cap funds in the sectoral category, this fund scheme charges a 2.08 per cent expense ratio which is lower than the 2.27 per cent category average.

Risk versus returns

This extremely high-risk fund that came into existence on December 28, 2015, delivered exponentially high returns from the first year itself. Systematic investments helped many to create a huge corpus as the magic of compounding earned returns on the returns from the regular investments made in this fund.

The fund earned 20.19 per cent annual returns every year, which is way more than the industry's expectations. You can view how the compounding effect helped to maximise returns over the period. Let us assume 10,000 SIP is made every month for the purpose of calculations.

Investment tenureTotal amount invested (in Rs)Estimated returns (in Rs)The total value of the investment (in Rs)
1 year1,20,00014,4101,34,410
2 years2,40,00059,5872,99,587
3 years3,60,0001,42,5735,02,573
4 years4,80,0002,72,0227,52,022
5 years6,00,0004,58,57110,58,571
6 years7,20,0007,15,28814,35,288

How much can you invest?

Those interested to invest in this fund must put in at least 5000 with every application, and in multiples of 1000 in further lumpsum purchases. The minimum purchase amount is 150 for those who wish to invest through SIPs. Thereafter, the investors can invest in multiples of 100 subject to a minimum number of 12 instalments.

Returns comparison of several value funds highlight the following

Name of the fundTwo-year returnsThree-year returnsFive-year returns
TATA Digital India Fund43.41%28.71%27.28%
SBI Technology Opportunities Fund38.38%27.04%24.78%
Aditya Birla Sun Life Digital India Fund42.04%30.04%26.09%
Franklin India Technology Fund26.44%22.62%19.78%
ICICI Prudential US Bluechip Equity Fund13.20%16.62%15.97%

Asset allocation

A maximum part of the fund’s money is invested in some of India’s top IT sector companies, thus, lending investors enough exposure to the sector that is growth-intensive, ubiquitous and essential to India’s economic progress. More than 77 per cent of the corpus is invested in technology companies, nine per cent in companies providing communication services with the remaining minor percentage being allocated to industrials and consumer cyclicals.

There are 35 stocks in this fund of which 62.89 per cent are in the large-cap category, 12.41 per cent in mid-cap investments, 11.89 per cent in small-cap stocks and the  5.75 per cent in other investments.

There is an exit load of up to 0.25 per cent against redemption made within 30 days. The idea behind parking money in this fund is to avail from investing majorly in a well-diversified assortment of stocks of fundamentally strong companies.

Note: This article is for information purposes only. Please speak to your SEBI-registered financial advisor before making any financial or investment decision.

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First Published: 13 Jul 2022, 01:00 PM IST