However, the current phase is not comparable with 2020. During the Covid pandemic, the entire market corrected sharply. This time, the Nifty 50 is only about 4.3 per cent below its all-time high, while the Nifty IT index is 33.5 per cent off its peak. In fact, three months before SIP returns turned negative in April 2020, average three-year returns were still in double digits, slipping only after the Covid-driven market crash.
The average 3-year SIP XIRR for IT funds now stands at -1.6 per cent compared with -7.1 per cent for the Nifty IT TRI, ACEMF data shows. In contrast, the broader Nifty 50 TRI has delivered a positive 9.1 per cent, underscoring the sharp divergence between sectoral and diversified exposures. A little over 4 years back, the 3-year SIP XIRR for IT funds was as high as 56.6 per cent.
Over the past year, 3-year rolling SIP returns have steadily compressed, reflecting earnings downgrades, slowing US discretionary technology spending, pricing pressures and the uncertainty around AI-led disruption.
Of the 13 active IT sector funds, five with over nine years of track record were considered for detailed comparison. On a 3-year SIP basis (as of February 27, 2026), Franklin India Technology Fund and SBI Technology Opportunities Fund delivered marginally positive returns of 1–2 per cent. Meanwhile, Aditya Birla SL Digital India, Tata Digital India, and ICICI Prudential Technology Fund posted negative returns ranging from 1.4 to 5.2 per cent.
Change in exposure
A comparison of IT allocations between January 2025 and January 2026 across 373 actively managed equity-oriented schemes shows four funds — including Samco Flexi Cap, Motilal Oswal ELSS, Motilal Oswal Large and Midcap, and Samco Dynamic Asset Allocation Fund — fully exiting IT exposure.
As many as 18 schemes reduced exposure by over six percentage points, including Helios Flexi Cap, Helios Large & Mid Cap, and Groww Multicap Fund, indicating proactive risk management amid expectations of demand slowdown and valuation compression.
Conversely, several funds maintained elevated exposure. Motilal Oswal Midcap, Motilal Oswal Flexi Cap, and Quantum Value held IT allocations of 17-19.5 per cent as of January 2026. Funds such as ICICI Pru Value, Motilal Oswal Balanced Advantage, Mahindra Manulife ELSS, and ICICI Pru Focused Equity increased exposure over the past year — a positioning that may weigh on near-term performance amid the sector’s correction.
Big changes
Within the 39 IT stocks analysed, fund managers displayed selective conviction. Holdings in Mastek rose 250 per cent, while exposure to Newgen Software and CE Info Systems increased 60-70 per cent.
In contrast, aggressive cuts were visible in high-beta names such as Nazara Technologies (Active funds’ holdings down by 82 per cent), Tata Technologies (down by 74 per cent), Zaggle (down by 61 per cent) and Tata Elxsi (down by 60 per cent).
Published on February 28, 2026