Mutual Funds Lower Tech Sector Exposure Over AI Disruption Concerns in April 2026

Mutual funds have significantly cut their holdings in the technology sector, reaching an 8-year low in April. This comes amidst rising concerns about AI disrupting traditional IT models and slow global IT spending. 

Decreased Technology Sector Allocation by Mutual Funds 

In April 2026, mutual funds reduced their exposure to technology stocks to 6.7%, marking a decrease of 60 basis points from the previous month and 180 basis points year-on-year. The move indicates a cautious approach by investors, given the ongoing transition in the IT sector. 

This reduction follows the underperformance of the Nifty IT index compared to broader markets over the past year. Concerns have surfaced that Indian IT firms may not be capitalising on initial AI opportunities. 

Shift to Domestic Sectors 

There is a noticeable shift towards domestic sectors like financials, manufacturing, and defence. These sectors offer better near-term earnings visibility, attracting stronger fund flows.  

Consequentially, the technology sector is experiencing relative underweight positioning among mutual funds. 

Read More: 5 Mutual Funds Make Complete Exit from 9 Midcap Stocks in April 2026 Portfolio Optimisation! 

AI's Impact on Traditional IT Models 

Artificial intelligence has emerged as a major disruptor for manpower-heavy IT outsourcing, particularly in repetitive coding and support services.  

Although AI automation threatens segments of traditional IT, large companies are swiftly adapting by investing in AI-related areas such as cloud transformation and cybersecurity. 

Technology Sector’s Performance Overview 

Over the last year, passive and active funds based on the tech sector have faced losses up to 26%. The Bandhan Nifty IT Index Fund recorded a decrease of 26.67%.  

In contrast, some international tech funds performed positively, like the Edelweiss US Technology Equity FOF that grew by 44.93%. 

Conclusion 

The significant reduction in mutual fund investment in the technology sector emphasises the current market sentiment driven by AI innovation and global IT spending challenges. While some segments within the sector may still hold long-term potential, there remains a cautious approach in the short term. 

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Disclaimer: This blog has been written exclusively for educational purposes. The securities or companies mentioned are only examples and not recommendations. This does not constitute a personal recommendation or investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.