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Summary: With technology stocks under pressure and sentiment weak, a contrarian stance is taking shape inside a large-cap portfolio. Here’s what’s driving that call.
Information technology (IT) has been one of the most testing segments of the Indian equity market over the past year. Weak global demand, prolonged softness in US tech spending and persistent concerns around artificial intelligence (AI) disrupting traditional outsourcing models have weighed heavily on sentiment. As a result, the BSE IT Index has fallen close to 20 per cent over the last 12 months, making it one of the worst-performing sectoral indices in this period.
For most large-cap fund managers, this has been a cue to stay cautious. For Franklin India Large Cap Fund, it has been an opportunity to lean the other way.
A contrarian bet as valuations reset
Over the past six months, Franklin India Large Cap Fund has steadily increased its allocation to technology, raising exposure from 13.7 per cent in June 2025 to 15.5 per cent by November 2025. Exposure remained above 15 per cent through October and November.
This makes it the large-cap fund with the highest technology exposure over this period. In comparison, UTI Large Cap Fund has around 11.5 per cent exposure to technology stocks, followed by Mahindra Manulife Large Cap at 10.8 per cent and Invesco India Large Cap at 10.2 per cent.
According to Venkatesh Sanjeevi, SVP and Portfolio Manager – India Equities at Templeton Global Investments and co-fund manager of the scheme, the increase is not a blanket sector call. The team has carried out a detailed bottom-up review of IT companies, analysing individual business segments to identify which areas are genuinely vulnerable to AI-led disruption and which remain relatively insulated.
His assessment is that while AI will lead to some disruption and pricing pressure, the revenue impact is likely to be modest, estimated at around 2–3 per cent over the next few years. Importantly, much of this risk, he believes, is already reflected in current valuations after the sector’s sharp underperformance.
Large-cap IT companies are now trading closer to 20 times earnings, levels that Sanjeevi views as offering reasonable valuation comfort, supported by strong free-cash-flow generation and consistent dividend payouts. Recent quarterly results have also been broadly stable, suggesting that fundamentals are holding up better than market sentiment implies.
Why the fund is willing to stay overweight
Beyond valuation comfort, the fund also sees potential cyclical tailwinds. US tech spending has remained subdued for nearly three years, raising the possibility of a gradual recovery once macro uncertainties and trade-related issues ease. In addition, the recent rupee depreciation could provide some margin support for export-oriented IT companies.
This technology overweight fits squarely within Franklin’s contrarian investment philosophy. Sanjeevi points to the fund’s earlier experience in the auto sector, where exposure was built when visibility was weak but valuations were attractive, and later pared back as the sector rerated.
The same discipline applies to technology. If valuations normalise meaningfully or more attractive opportunities emerge elsewhere, the fund is prepared to moderate its exposure. For now, however, technology offers a rare combination of uncertainty, valuation comfort and potential upside—conditions under which Franklin India Large Cap is willing to take a differentiated call.
You don’t need to take a view on IT to learn from this. What matters is understanding why a fund is positioned the way it is and whether that fits your own risk comfort and time horizon. Value Research Fund Advisor helps you see inside fund portfolios and decide which funds truly deserve a place in your portfolio, instead of reacting to short-term sector noise.
Disclaimer: This content is for information only and should not be considered investment advice or a recommendation.
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