Over one-fourth of focused mutual fund schemes had no exposure to largecap IT services companies as of July 2026, according to reports from Business Standard. The largest fund in this category, SBI Focused Fund with over ₹50,000 crore in assets, maintained no exposure to even small and midcap IT services firms. Old Bridge Focused Fund also had nil exposure to the sector, while six other focused funds including ICICI Prudential, Invesco, JM Financial, Motilal Oswal, and Baroda BNP had limited exposure only to small and midcap firms. None of these funds invested in the six largecap IT services firms: TCS, Infosys, HCL Technologies, Wipro, LTIMindtree and Tech Mahindra.
IT services stocks have experienced significant pressure over the past two years, with prices declining from 2025 and the sell-off continuing through the first half of 2026. According to reports from Business Standard, the Nifty IT index fell 44% during this period, pushing valuations to their lowest levels since Covid at around 19 times trailing price-to-earnings (PE). The sector faced challenges from weak global tech spending, delayed discretionary deals and concerns over artificial intelligence (AI)-led disruption to traditional outsourcing models.
Axis Focused Fund, which had no IT services exposure in June, added Infosys in July, as reported by Business Standard. The MF holding in the IT sector as a percentage of total equity assets was down to an eight-year low in April 2026 at 6.7%, according to a Motilal Oswal MF report. Despite the challenging period, Nifty IT is now up 21% from the July 1 lows, led by foreign institutional inflows in the past two months. Few flexicap funds, like that of Abakkus MF, have negligible exposure to IT services firms.
Sanjay Doshi, head of investments and research at Abakkus Mutual Fund, attributed the underweight stance to IT services stocks not meeting growth and valuation criteria, as reported by Business Standard. He noted that while the sector faces challenges from weak discretionary spending, global macroeconomic uncertainty, and AI-led technological changes, the fund remains cautious on the IT services segment. "While we continue to evaluate opportunities across the technology landscape, we remain cautious on the IT services segment. The sector is facing a challenging environment, with growth impacted by weak discretionary spending, global macroeconomic uncertainty, and the evolving impact of AI-led technological changes," Doshi explained. Souvik Biswas, head of research at Bajaj Capital, explained that while valuations may have bottomed out, the predictability and direction of a turnaround is not clear, with most money managers preferring clarity on industry future before investing.
