Mutual Fund Technology Sector: India’s mutual fund industry is rapidly reshaping its sector preferences. Once considered a cornerstone of institutional portfolios, the technology sector dominated the mutual fund industry for a long time. However, the IT stocks witnessed a sharp decline in allocation to a nearly decade-long low, even as investors continue to pour money into equity schemes through SIPs, according to the latest May 2026 edition of the “Fund Folio: Indian Mutual Fund Tracker” by Motilal Oswal Financial Services.
Technology’s weight slips to 8-year low in April 2026
According to the report, the technology sector’s weightage in domestic mutual fund portfolios slipped to an eight-year low of 6.7 per cent in April 2026, down 60 basis points month-on-month and 180 basis points year-on-year.
Major sell-off in blue chip tech companies: Infosys tops the list
Infosys: Infosys saw a value decline of Rs 38.5 billion, down 3.5 per cent MoM, despite funds increasing their share count by 2.1 per cent.
Wipro: Wipro witnessed a sharp value contraction of 18.5 per cent, with mutual fund houses significantly reducing their holdings by 114.4 million shares, a reduction of 23.8 per cent MoM.
Persistent Systems: Also featured among the top laggards, with a decline of 4.1 per cent MoM in value.
The ‘tech-to-industrials’ shift
“The month witnessed notable changes in the sector and stock allocation of funds. On a MoM basis, the weights of Capital Goods, NBFC -Lending, Utilities, Retail, NBFC -Non Lending, Chemicals, Real Estate, Logistics, and EMS increased, while those of Technology, Private Banks, Healthcare, Oil & Gas, Automobiles, Telecom, Insurance, and Cement moderated,” the report said.
Exposure to technology remains varied across major fund houses. As of April 2026, the technology sector’s weightage in key portfolios stood at:
- Franklin Templeton: 9.2%
- SBI Mutual Fund: 7.5%
- ICICI Prudential: 6.7%
- HDFC Mutual Fund: 4.7%
Reasons behind the decline
According to Nikunj Saraf, CEO of Choice Wealth, technology’s weight slipping to an eight-year low in April looks more like a pause than a permanent verdict on the sector.
Explaining the probable reason behind the shift in the trends, Saraf said, “The cut-back reflects a mix of valuation reset, cautious client spending, and earnings visibility that is still not as strong as investors would like. Global AI disruption fears, war-related uncertainty, and a softer demand environment have kept sentiment uneven, even though the weaker rupee offers some support to exporters. At the same time, investors have clearly been rotating toward broader-market opportunities such as mid- and small-caps, where earnings resilience and post-correction valuations have looked more attractive.”
Harsh Thakkar, Equity Research Analyst, SAMCO Securities, said, “Technology’s weight falling to an eight-year low of 6.7 per cent reflects a combination of weak near-term earnings visibility and structural changes within the global IT services industry. Global clients, particularly in the US and Europe, are reducing discretionary technology spending and delaying deal execution amid macroeconomic uncertainty.”
“At the same time, Generative AI is disrupting the traditional headcount-led outsourcing model, with spending increasingly shifting towards AI platforms, cloud infrastructure and automation-led solutions,” Thakkar stated.
Going forward, Saraf said the strategy should be selective rather than aggressive. “Focus on tech names with strong deal pipelines, pricing power, and credible AI monetisation, instead of treating the whole sector as a blanket overweigh,” Saraf concluded.
Echoing similar sentiment, Thakkar said, “Going forward, investors should remain selective within the sector, focusing on companies with strong AI capabilities, resilient cash flows, diversified client exposure and healthy balance sheets. Staggered allocations rather than aggressive lump-sum investments may be a more prudent approach in the current environment.”
(Disclaimer: The above article is meant for informational purposes only, and should not be considered as any investment advice. ET NOW DIGITAL suggests its readers/audience to consult their financial advisors before making any money-related decisions.)
