IT Stocks Crashed 20%. What Happened to IT Mutual Funds?

When the NIFTY IT Index fell nearly 20% over the past year, most technology mutual funds also declined sharply.

Source: TradingView| NiftyIT

But three funds: Edelweiss Technology Fund, Invesco India Technology Fund, and WhiteOak Digital Bharat Fund barely moved in comparison. While the sector benchmark suffered a steep fall, these funds recorded only small declines.

A Clear Gap in Performance

Source: mutualfundssahihai

Most IT funds declined broadly in line with the sector downturn. But the three funds at the top limited their losses significantly, suggesting that their portfolios were structured differently from the rest of the category.

The Traditional IT Fund Problem

Historically, most IT mutual funds in India have focused heavily on IT services companies, such as:

• Infosys

• TCS

• HCLTech

• Wipro

• Tech Mahindra

These companies dominate the sector benchmark and depend heavily on global outsourcing demand. When international clients reduce technology spending, these stocks tend to fall together. Funds heavily invested in these companies, therefore, move closely with the sector itself, which explains why many IT mutual funds declined between 7% and 17% during the past year.

However, the three resilient funds approached technology investing differently.

Edelweiss Technology Fund: Global Technology Exposure

Among all the funds, the Edelweiss Technology Fund stands out the most.

While the IT sector benchmark fell sharply, the fund recorded a return of -0.43%, meaning it almost avoided the downturn.

A closer look at its portfolio helps explain why. The fund includes global technology companies such as NVIDIA and Apple, alongside Indian firms like Infosys and Tech Mahindra.

This gives the portfolio exposure to global technology trends, including:

• artificial intelligence infrastructure

• semiconductor demand

• global technology platforms

These segments remained relatively resilient globally even as traditional IT outsourcing companies faced slower demand. Because of this international exposure, the fund’s performance was less dependent on the decline in Indian IT services companies, helping cushion the fall.

Invesco India Technology Fund: A Digital Economy Portfolio

The Invesco India Technology Fund also limited its losses to around 2%, and its portfolio reveals why: While the fund holds companies such as Infosys and Persistent Systems, it spreads its investments across the broader digital economy.

Some holdings include companies such as:

• Bharti Airtel

• Multi Commodity Exchange

• PB Fintech

• Meesho

Industry allocation highlights this diversification. While IT software accounts for roughly 39% of the portfolio, exposure to pure IT services is only about 5%, with the rest spread across sectors such as retailing, telecom services, fintech and capital markets. This diversified exposure means the fund is not overly dependent on outsourcing companies, reducing the impact of the IT sector slowdown.

WhiteOak Digital Bharat Fund: Betting on the Digital Economy

The WhiteOak Digital Bharat Fund follows a similar philosophy. Instead of focusing primarily on outsourcing companies, the fund invests across India’s broader digital ecosystem.

Its portfolio includes companies:

• Bharti Airtel Limited

• Multi Commodity Exchange

• Eternal Limited

• Meesho Ltd

This broader exposure allows the fund to benefit from India’s expanding digital economy while reducing reliance on traditional IT services companies. As a result, when outsourcing demand slowed globally, many of these businesses were less directly affected, helping stabilise the fund’s performance.

A Changing Definition of Technology Investing

The performance gap between these funds reflects a broader shift in how technology investing is evolving.

Technology today extends far beyond outsourcing services. The sector increasingly includes:

• artificial intelligence

• cloud infrastructure

• semiconductor manufacturing

• digital platforms

• telecom networks

• fintech ecosystems

Some mutual funds have begun adapting to this broader definition of technology, while others remain largely focused on the traditional IT services model.

The Takeaway

The past year did not show that IT mutual funds can completely avoid sector downturns. Most funds still moved broadly in line with the decline in IT stocks.

However, the experience of Edelweiss, Invesco and WhiteOak highlights an important lesson: portfolio diversification within the technology ecosystem can make a significant difference. Funds that spread their investments across the broader digital and global technology landscape were able to cushion the fall far better than those concentrated mainly in Indian IT services companies.

As technology continues to reshape the global economy, the future of technology investing may increasingly lie not just in outsourcing firms, but across the wider digital ecosystem driving modern growth.

Disclaimer: This content is for educational purposes only; please conduct personal research and consult a qualified investment advisor before making any investment decisions.

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