What you see is not quite what you get. Just when it seemed that we were at the bottom of things, and that the only way for the Sensex was up-out sprung three surprises: Infosys, Mastek, and Wipro.

It all began when the ever-upright Infosys Chief, N.R. Narayana Murthy, released his famous gloomy guidance that sent the price of Infosys into unprecedented free-fall for the day. Mastek and Wipro followed suit with gloomy prognostications of the future. Analysts were aghast, their calculations in disarray. Tech tumbled, as a sector, taking with it a large chunk of the Sensex. And before anyone knew it, it was a meltdown of proportions that nobody could have predicted. All the more because the tech-laden NASDAQ had shown a rise of 9.2 per cent, from which the tech stocks around the world were expected to take their cues.

April Angst

That was April, in short. A rather strange month, no matter how you look at it. A month that gave stock players in India an acute feeling of being left out of all the world action, even as global indices went up, as predicted by US-policy optimists, on news of a market-positive conclusion to the Iraq War. The KOSPI was up 12 per cent, FTSE up 9 per cent, and Dow up 6 per cent. SETI, STI and Hang Seng too managed to remain positive. But back here at home, the BSE Sensex dipped 2.9 per cent and the S&P Nifty, 4.5 per cent.

As mentioned, standard expectations did not play out. So you can imagine how the mf industry fared. Tech funds, specifically, were thrown into a tizzy by the tech meltdown. None could escape it. Funds with high exposure to it stocks were the worst hit, with Franklin Infotech Fund leading the pack with a negative return of almost 16 per cent. This (hopefully rare) phenomenon pulled the average performance of equity schemes down to a meagre 0.28 per cent.

However, fund managers did well to reduce the losses when compared to the loss in value of the BSE it index, which shed 23.73 per cent during the month. The best performing fund was a surprise, with Taurus Libra Tax Shield generating 10.76 per cent. Franklin India Prima Fund, with its rather small exposure to it stocks, was close behind with a return of 9.82 per cent. The top performing funds were those with lower exposure to it stocks and strong concentration of old economy stocks.

Mixed Response

There was a mixed response to the IT shock. While some fund houses sold off large parts of their it holdings, others looked at bargain it opportunities. While Alliance, Birla and Tata bought Infosys, Franklin, Kotak and Pru ICICI were sellers at the counter. Net net, fund managers continue to hold the sector in high regard. Yet, Infosys slipped two positions from its rank of being the most popular stock (See Popularity Chart), and Wipro moved out from the top 10 altogether. As analysts get bullish on the old economy again, Reliance Industries, the old time favourite, has gained the numero uno position. April also saw buying interest in Grasim, ITC, HLL, and Hindalco.

Pharma was another zone of interest, with the sector's dominance rising in some cases. Among sectoral funds, the km MNC fund did particularly well. So too the Alliance Buy India Fund, which had a third of its portfolio locked up in pharma stocks. Alliance Basic Industries, with its 50 per cent allocation to PSU stocks, was the only fund that broke into the performance domain of sectoral funds otherwise dominated by pharma/FMCG funds.

Other Trends

Banking stocks continued their upward march through April, and helped mutual funds regain some lost ground, with several such stocks touching their respective 52-week highs. Yet, there were no obvious picks on the market in April. To exemplify this, as with previous months, mid-cap funds did particularly well. This was because there had been little earlier interest in mid-cap stocks, but many of them posted impressive gains after being propelled upwards by the attention generated by their results. Clearly, not-so-famous stocks continue to be good punts for funds that do their homework. The lack of buying interest in the usual high-profile stocks may also have helped mid-caps do well.

Junior Bees, a fund launched recently to track the CNX Nifty Junior Index comprising small and mid-cap stocks, outperformed all its peers in its category, delivering a return of 6.23 per cent.

In all, India's mutual fund houses were net sellers in April. Many fund managers preferred to maintain high cash reserves, waiting for an appropriate investment opportunity. The markets were simply too it-stricken last month. And so, in spite of the Iraq War having gone in favour of the US and the fact that India's macro economic factors are, if anything, displaying a bias towards positive sentiment.

Take a quick look at the key numbers. Domestic growth projections by most economists range from 5.5 to 6.5 per cent, higher than most other economies in the world. There seems to be no threat of the fiscal deficit going out of hand. On the external economy front, things have never been better, with an ever-rising succession of dots on the forex reseves chart. The current account surplus continues to swell. Indian exports grew by 17 odd per cent in 2002-03, as against a decline of 0.8 per cent the previous year, and exporters are confident of offsetting the effects of the weakening dollar with stronger performances.

Still, saying that the markets have bottomed out would be a brave call to make, what with fundamentals going off at a tangent to the returns that they should dictate. Also, technical analysts have nothing more to tell us, other than their 'range-bound' predictions.