IT stocks now account for just 6.7% of mutual fund equity holdings in April 2026, marking the lowest allocation in eight years, according to a report from Motilal Oswal Financial Services. This represents a 60 basis points decline month-on-month and a 180 basis points decrease compared to April 2025. The sector's decline reflects broader concerns about artificial intelligence adoption and changing business models in the traditional IT outsourcing space.
According to data from PRIME Database, HCL Technologies, Infosys and Tata Consultancy Services (TCS) remained the top three stocks where PPFAS Mutual Fund raised its stake in April 2026. The fund house deployed ₹1,768 crore last month, bringing down its cash allocation to 18.71% of total assets. PPFAS bought HCL Tech shares worth ₹1,417 crore, Infosys shares amounting to ₹1,181 crore, and TCS shares valued at ₹847 crore, underscoring bottom fishing in the beaten-down sector.
Legendary investor Jeremy Grantham has warned that AI has become the only thing preventing a recession and market crash, as reported by Business Insider. Speaking on the Excess Returns podcast, Grantham said he believes the US would have entered a recession in 2023 were it not for massive AI investments. "My guess is that in 2023 we would have moved into a recession and the market would have gone down another 25%. And AI headed it off," Grantham stated. He described the current situation as "terra incognita" due to the US's unprecedented reliance on AI spending as a percentage of GDP.
The Nifty IT index remains the worst-performing index in 2026, down over 22% from its December 2024 peak, as reported by Motilal Oswal Financial Services. Fears of a slowdown in discretionary spending, rising costs due to higher H-1B visa fees, and potential disruption from advancements in artificial intelligence to the traditional outsourcing model have weighed on large Indian IT services companies. Weak global demand and cautious client spending have significantly slowed deal activity and delayed project ramp-ups across the sector.
According to a report from Nuvama Alternative & Quantitative Research, SBI MF had the lowest IT allocation among large fund houses at 5.9% in April 2026, compared to 6.4% in April 2025. Vivek Gedda, fund manager at SBI MF, explained that the fund house has maintained low IT exposure due to compelling opportunities elsewhere and emerging structural questions around the industry. Six other large fund houses covered by the Nuvama report maintained less than 10% exposure to the sector, while UTI MF had the highest holding at 15.7% despite reducing its exposure in the last year.
