But select mutual fund schemes were able to notch up good returns despite being in these sectors by tweaking the investment mandate and smart stock-picking within the mid- and small-cap segments.
The Sensex gave nearly 38 per cent returns this year, even as IT, auto and pharma indices gave poor returns in 2007 on the rupee appreciation, fears of a US recession and high interest rates in India.
Benchmarked against the BSE Teck Index, DSPML's Technology.com fund has managed to give annual returns of 57.95 per cent as on December 20. The index itself has gained by 2.05 per cent, while the BSE IT index fell by 19.52 per cent since the start of the year.
"The objective of the fund is to play the converging universe within the media, telecom and technology space. At some point, our exposure to large-cap stocks within this space was nearly 50 per cent, but we have reduced that to around 20-25 per cent now. Several companies within the IT services space have the potential to turn into large-caps," said Apoorva Shah, fund manager, DSPML Technology.com.
Similarly, the Reliance Pharma fund has given 46.67 per cent returns even though the BSE Healthcare Index showed a 11.06 per cent gain.
The FMCG sector, which has traditionally been considered a laggard, fared no better. The BSE FMCG Index registered a gain of 13.27 per cent since the start of the year. ICICI Prudential's FMCG fund has managed to notch up 33.7 per cent returns.
The BSE Capital Goods Index, which gained by 103.63 per cent, was the best performing index in 2007.
The mutual fund distributor fraternity feels that sector-specific funds are a dated concept in the current situation. Fund managers argue that investors should allocate a small portion of their portfolio to a sector that they are bullish on as a part of their asset allocation mix.
"The markets have different preferred sectors at different times. Currently, the flavour of the market is more bent towards infrastructure. Considering these factors, the cash inflows have not been that high. However, because of the secular growth story being witnessed by India and the consumption-based economy, there will always be a demand for consumption-driven sectors. The FMCG sector is set to gain from this trend," said Prashant Kothari, fund manager, ICICI Prudential FMCG Fund.
