Four technology fund managers are taking dramatically different approaches to positioning for Indian IT sector recovery, according to Value Research's Mutual Fund Insight report. Sumanta Khan's Edelweiss Technology fund carries the highest US technology exposure at nearly 27%, a bet he acknowledged would be most vulnerable if AI valuations prove to be a bubble. In contrast, Meeta Shetty's Tata Digital India fund holds no US stocks at all, maintaining what she calls a deliberate, true-to-label position. Shibani Sircar Kurian's Kotak Technology fund keeps cash at 2-5% purely for liquidity, while Vaibhav Dusad of ICICI Prudential Mutual Fund maintains active cash at 10-12% as recovery ammunition.
Latest quarterly results reveal stark performance divergence across major IT companies. Infosys reported a lacklustre 1% growth quarter-on-quarter in constant currency terms, with revenues reaching ₹48,211 crore in the June 2026 quarter. The company's key financial services vertical, accounting for 27.9% of total revenues, showed sluggish performance compared to 28% in March 2026. Tech Mahindra emerged as the clear leader with 2.6% quarterly growth, benefiting from strong manufacturing vertical growth of 9% q-o-q and BFSI segment growth of 2.7% q-o-q. HCL Tech reported a decline of 0.5% q-o-q with revenues at ₹34,579 crore, facing challenges in telecommunications and media verticals.
AI technology is directly attacking the industry's core billing model, as reported by Value Research. AI allows clients to get the same work done with fewer people, undermining the traditional model where more engineers meant more billable hours and revenue. Vaibhav Dusad has trimmed his growth expectations from 6-8% annually to 5-7%, even as share prices now price in something close to no growth. The sector has previously weathered comparable shocks, including the shift to cloud computing, without disappearing entirely. Infosys highlighted 8.2% of its revenues was derived from AI-related work, while HCL Tech's Advanced AI revenues were $171 million (nearly ₹1,625 crore) in the June 2026 quarter, showing strong growth of 10.6% q-o-q on constant currency basis.
Operational efficiency has become a critical differentiator in the current market environment. Tech Mahindra achieved significant cost optimization with core operating profit margin growing 50 basis points q-o-q to 17.5%, benefiting from workforce reduction of 863 employees and improved employee costs at 50.1% of revenue. HCL Tech maintained strong margins with operating profit margin rising 20 basis points q-o-q to 19.9%, supported by workforce reduction of 3,292 employees. In contrast, Infosys faced margin pressure with core operating profit margin shrinking 40 basis points q-o-q to 23.7%, despite workforce reduction of 532 employees. Net profit performance varied significantly, with Tech Mahindra's net profit growing 9.6% q-o-q to ₹1,486.3 crore and HCL Tech's net profit rising 3% q-o-q to ₹4,626 crore, while Infosys' net profit declined 8.6% q-o-q to ₹7,775 crore due to higher cost structure.
All four managers expect the sector to recover, with varying views on growth patterns and business model evolution. Kurian and Khan expect the transition to reward stock-picking, arguing the sector will grow more heterogeneous with clear winners and losers as firms shift from selling time to selling outcomes. Kurian noted that revenue mix at large IT firms is now roughly half time-and-materials, with the rest on outcome-based or fixed-price contracts. However, Dusad disagrees, expecting most companies to eventually converge on similar business models with some lag. The common thread across all managers is that investors need to understand which specific bet their fund is making, rather than treating technology funds as interchangeable. Infosys has trimmed its FY27 growth forecast to 1.5%-3% in constant currency, while HCL Tech maintains its growth forecast of 1.5%-4.5% y-o-y and Tech Mahindra has not provided specific FY27 guidance. Tech Mahindra trades at a premium P/E of 28.9 times compared to Infosys at 14.1 times and HCL Tech at 18.6 times, reflecting market expectations for faster recovery.
