Mutual Funds Reduce Exposure to IT Stocks Amid AI-Related Concerns

Indian mutual funds have reduced their exposure to information technology (IT) stocks, with the sector’s share of equity assets falling to a record low . The shift reflects concerns about the potential impact of artificial intelligence on technology services and uncertainty around client spending.

Why Fund Managers Are Becoming Cautious

The rapid adoption of AI tools has raised questions about traditional IT services business models, project pricing and future demand for some technology services.

Slower spending by clients has also contributed to uncertainty about the sector’s earnings outlook.

As a result, some fund managers have reduced their exposure to IT companies, while others continue to hold or selectively add shares in businesses they consider better positioned for changing industry conditions.

What This Means for IT Stocks

Lower mutual fund ownership can influence demand for shares, although stock prices are also affected by company earnings, valuations, foreign investor activity and broader market conditions.

The change does not mean every IT company faces the same challenges. Businesses differ in their exposure to AI, customer mix, service offerings and ability to adapt to new technologies.

What Mutual Fund Investors Should Consider

Investors holding equity mutual funds should avoid making decisions based solely on one sector’s changing allocation. A diversified portfolio can reduce dependence on any single industry, though it cannot eliminate market risk.

Before changing an SIP or redeeming units, investors should consider their investment horizon, financial goals and the actual sector exposure of their own schemes. Market trends alone do not guarantee future returns.

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