The Future is Digital: Why Tata Digital India Fund Should Be in Your Portfolio

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Did you know India is making long strides in the digital world? Yes, the IT sector stands as the major contributor to India's economy. Under the government of our honorable Prime Minister, Shri Narendra Modi, initiatives like "Digital Bharat" are helping new technologies reach every corner.  

This reliability has made mutual funds that invest in top IT companies like Wipro and Tata Consultancy a hot pick to make high returns.

But how do you know which fund will be a valuable addition to your portfolio?

Introducing you to one of the best performers in the sectoral technology category, the Tata Digital India Fund, which has been around since 2015. Yet, in this short span, it has delivered 46.36% annualized SIP returns in one year.

In this post, you will see whether it can be the best IT Sector Mutual Fund to be in your portfolio for 2024.

What is the 5 Year Return of Tata Digital India Fund?

Let’s the year-wise SIP returns of this IT Sectoral Fund:

In the above graph, the red box shows the SIP returns achieved by the fund. Likewise, the yellow graph compares the fund’s returns with benchmark returns.

As you track the performances of past years, the Tata Digital India Fund has outperformed its benchmark with amazing margins.

In one year, it boasts an impressive 46.36% annualised SIP return. Strongly continuing its consistency by 26.40% and 28.02% SIP returns in 3 and 5 years respectively.

You find it a little difficult to understand, right? Let’s take a simple example.

Imagine you started a SIP shorter for a systematic investment plan of Rs.3000 every month. Now you kept it for 5 years which means, you would have invested a total figure of Rs.1,80,000. Now as per the current value, you would have made a whopping wealth of Rs.3,55,099 as your total savings.

Try out this amazing yet simple SIP Calculator tool to know your returns.

Now, this can pop a new question: How do you know if it's a worthy investment?

Let's grasp some insights by understanding the investment strategy on which Tata Digital India Fund is built.

Investment Strategy Adopted by Tata Digital India Fund

The Tata Digital India Fund has a well-rounded investment approach to take advantage of India's digital revolution. It has kept its focus on companies driving digital innovations in sectors like e-commerce, fintech, IT services and digital marketing.

Moreover, due to the growing demand and supply of technology, the IT sector and IT-related companies will experience huge growth and earnings margins.

That's exactly where this fund comes into play, using its bottom-up approach and finding the best IT companies with strong fundamentals and clear growth plans. For example, it plans to invest in top-performing IT companies like Tata Consultancy, Infosys and Wipro Limited, which are at the forefront of making the highest revenue for the Indian economy.

Well, this leads you to question the expertise or who manages this fund. Let’s answer that.

Who is the Fund Manager of Tata Digital India Fund?

Meet Ms Meeta Shetty, an intelligent and experienced fund manager with 13+ years of knowledge. She follows a unique investment style, called GARP. It stands for growth at a reasonable price. You will see how smartly she has divided the portfolio into two parts to maximize the overall returns.

Ms Shetty has focused on two important elements, stability and alpha generation. This means it majorly targets 78.9% of large cap stocks for stability and consistent growth. Likewise, investing 18.9% in mid cap and 2.2% in small cap Mutual Funds for higher growth potential.

To prove the facts, you can see the portfolio allocation of Tata Digital India Fund in the below chart:

Taking you a step closer, let’s see the distribution of assets in this fund.

What is the Sector Allocation of Tata Digital India Fund?

Let’s review the distribution of assets by this fund across various sectors with the help of a graph:

The above graph clearly shows it is a sector-specific fund. Amongst the top 5 sector holdings, the major investment lies in the technology sector at 89.68%.

This makes it quite a risky investment, which is why it must have quality stocks in its portfolio.

You will find the stock quality in the next question.

Is Investing in Tata Digital India Fund Good for Portfolio?

One key factor that makes it the best IT Sector Mutual Fund for your portfolio is:

Stock Quality: It means investing in good quality companies and strong fundamentals, high growth margins, good cash flow and price-to-earnings (PE) ratios.

Coming back to Tata Digital India Fund, the current valuation stands very high at a 34.71% price-to-earnings ratio.

Luckily, it has good growth earnings of 18.69%, proving that with high risk comes high rewards as well. Likewise, the sales growth at 4% and cash flow at 28.39% draw a healthy picture to make steady returns.

You will find the valuations in the below table:

The next section will tell you if Tata Digital India Fund suits your investment goals or not.

What Does the Tata Digital India Fund Suitability Charts Shows You?

It is clear that, the fund plans on making high returns from the quickly making growth of the IT sectors. Let’s see if it suits you:

• Now, if a high reward with a high-risk mindset suits your goals, this fund gives you the perfect opportunity.
• If diversification is what you seek, it will diversify your portfolio from regular equity funds to high-growth funds.
• Moreover, if you too had set your target for the long term, this fund totally supports it. The ideal investment duration for this fund is 5-7 years.
• Lastly, though this fund is volatile meaning risky, the Tata Mutual Fund has a reputation for handling market swings effectively.

Final Words

In short, this fund checks out every point that makes it a valuable addition to your portfolio. Nonetheless, investing via the SIP route is the best strategy to cancel out any major risk that may arise. Though it's a great opportunity, it also comes rarely which is why it is necessary to know the right time for investment. Luckily, this is your chance to take advantage of this growing IT Sector and make high returns with expert management every step of the way.