Indian mutual funds have significantly reduced their technology sector holdings following the Nifty IT index peak in December 2024. Fund managers are moving capital into other areas, citing concerns over slow revenue growth and potential business disruption from artificial intelligence. The trend varies by scheme, with some funds aggressively selling off IT stocks while others maintain their positions.
Indian mutual funds have shifted their investment strategy regarding the technology sector over the past two years. Since the Nifty IT index reached a high of 45,995.80 on December 13, 2024, fund managers have steadily reduced their exposure to technology stocks. This move suggests growing caution among institutional investors regarding the sector’s near-term growth outlook and the potential long-term impact of artificial intelligence on traditional business models.
Data from recent portfolio disclosures reveals that some funds have made sharp cuts to their IT holdings. For example, the Groww Multicap Fund reduced its IT exposure from 54.73% to 4.75%. Similarly, the Samco Multi Cap Fund cut its technology footprint by over 34 percentage points. Larger, well-established funds like HDFC Flexi Cap, HDFC Large Cap, and DSP Large Cap have also moved from significant double-digit allocations down to single-digit territory.
However, it is important to understand that not all reductions are caused by active selling. A decrease in a sector’s weight can also happen through passive rebalancing. If IT stocks perform worse than other sectors in a portfolio, their relative weight naturally drops. Furthermore, when funds receive new money, managers might choose to invest those fresh inflows into different sectors, which automatically reduces the percentage share of technology stocks in the total portfolio.
Investment strategies remain varied across the industry. The Parag Parikh Flexi Cap Fund, while moderating its exposure from 28.53% to 16.17%, continues to hold a higher concentration of IT stocks compared to many peers. Conversely, the Motilal Oswal Midcap Fund has taken a different approach, currently holding 23.73% in IT assets. A few funds, such as LIC MF Midcap and Taurus Mid Cap, even slightly increased their technology weightings during this period, showing that fund managers do not hold a single, unified view on the sector's future.
For individual investors, this shift in mutual fund portfolios is a useful reference point, but it should not be the sole basis for investment decisions. It highlights that professional managers are balancing risks related to global demand, pricing pressures, and the rapid pace of technological change. The most important factor for investors to track next will be the upcoming earnings reports and management commentary from leading IT companies, which will indicate whether these growth concerns are materializing into real business results or if the sector is beginning to stabilize.