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Summary: An announcement by Anthropic in February sent shockwaves across Indian IT companies. While the sector crashed, leading many mutual funds to trim their exposure, a handful of schemes went ahead and bought the dip. We look at such funds and what this means for you.
February was a turbulent month for Indian IT. Anthropic rolled out new AI plug-ins on February 3, 2026, and the market decided that Indian IT companies, which sell human effort at scale, had a problem.
Subsequently, between February 3 and May 12, 2026, the Nifty IT TRI fell nearly 27 per cent. The Nifty 50 TRI dropped just 9 per cent over the same period. If your fund held Infosys or TCS, you felt it.
What happened next split the mutual fund world.
Of the 203 active diversified funds tracked across five categories — flexi-cap, large & mid-cap, multi-cap, value-oriented and ELSS — 177 reduced their allocation to technology stocks in the months after the announcement. Just 26 added to it.
The concern behind the retreat is real. AI tools that automate software development, testing and business processes go after the core of what Indian IT services companies sell. The market is not panicking without reason.
The tech stocks funds love the most
We looked at active funds across five diversified categories: flexi-cap, large & mid-cap, multi-cap, value-oriented and ELSS. We used six-month average allocations as of April 30, 2026, and selected the five names held by the most funds. Only funds with at least one year of history were included.
Tech darlings
Five most widely held names by mutual funds and how they have performed post the AI-triggered sell-off
| Company | Number of funds invested | Average weight (%) | Return since Feb 3, 2026 (%) |
|---|---|---|---|
| Bharti Airtel | 168 | 2.9 | -5.7 |
| Infosys | 168 | 2.6 | -33.9 |
| Eternal | 137 | 2.1 | -12.2 |
| Tech Mahindra | 114 | 1.5 | -21.7 |
| Tata Consultancy Services | 95 | 1.8 | -30.4 |
| Based on six-month average holdings as of April 30, 2026; returns as of May 12, 2026. Includes active funds from diversified categories (flexi-cap, multi-cap, large & mid-cap, ELSS and value-oriented) with at least one year of track record. Technology sector classification as defined by Value Research. | |||
Infosys is down 33.9 per cent. TCS is down 30.4 per cent. Tech Mahindra has lost 21.7 per cent. Three of the five most widely held tech names have shed between a fifth and a third of their value since February. Bharti Airtel, which is a telecom business, and Eternal have held up better. The market is not treating all technology the same; it is targeting IT services specifically.
Caution won. But conviction showed up too.
We compared each fund's three-month average technology allocation before and after the announcement. The before window covered November 2025 to January 2026, while the after window includes the period from February to April 2026.
Treading with caution
More funds reduced tech exposure than added to it
| Allocation change range | Funds that increased allocation | Funds that decreased allocation |
|---|---|---|
| 0 to 2% | 22 | 104 |
| 2 to 4% | 3 | 53 |
| More than 4% | 1 | 20 |
| Based on the three-month average allocation to technology before (November 2025-January 2026) and after (February-April 2026) the announcement. Includes diversified funds (flexi-cap, multi-cap, large & mid-cap, ELSS and value-oriented) with a track record of at least one year. Technology sector classification as defined by Value Research. | ||
At every level of conviction, the sellers outnumber the buyers. In the 0-2 per cent range, 104 funds trimmed against 22 that added. In the 2-4 per cent bucket: 53 cuts, three additions. At the extreme end, 20 funds reduced exposure by more than 4 percentage points. One fund added by the same margin.
The sharpest cuts
Though 177 funds pared their stake in IT companies, a few of them saw a substantial fall in exposure. We look at five such funds.
Top 5 funds that decreased tech allocation
These funds reduced tech exposure the most after the AI-triggered sell-off
| Fund name | Nov '25 to Jan '26 (%) | Feb '26 to Apr '26 (%) | Change (%) |
|---|---|---|---|
| Motilal Oswal Multi Cap | 32.7 | 19.6 | -13.1 |
| Motilal Oswal Flexi Cap | 30.5 | 21 | -9.5 |
| HSBC Large and Mid Cap | 16.7 | 7.5 | -9.2 |
| Old Bridge Focused | 17.6 | 8.6 | -9 |
| SBI Flexicap | 15.6 | 8.1 | -7.5 |
| Based on the three-month average allocation to technology before (November 2025-January 2026) and after (February-April 2026) the announcement. Includes diversified funds (flexi-cap, multi-cap, large & mid-cap, ELSS and value-oriented) with a track record of at least one year. Technology sector classification as defined by Value Research. | |||
Motilal Oswal Multi Cap cut its tech allocation by 13.1 percentage points, the most of any fund tracked. Motilal Oswal Flexi Cap follows with a 9.5-point reduction. Both funds were running high technology weights going in, which made the decision starker. HSBC Large and Mid Cap, Old Bridge Focused and SBI Flexicap each trimmed their tech exposure meaningfully, halving or near-halving it.
The daring ones
While most funds rushed to sell off their IT holdings, others took the bolder route, increasing their investment post the sector’s crash.
Top 5 funds that increased tech allocation
These funds raised their tech bets the most post-Anthropic’s announcement
| Fund name | Nov '25 to Jan '26 (%) | Feb '26 to Apr '26 (%) | Change (%) |
|---|---|---|---|
| LIC MF Value | 4.4 | 10 | 5.6 |
| SBI Focused | 13.3 | 16.6 | 3.3 |
| HDFC Flexi Cap | 9.2 | 12.2 | 3 |
| HDFC Focused | 7.5 | 10.4 | 3 |
| Nippon India ELSS Tax Saver | 8.5 | 10.1 | 1.5 |
| Based on the three-month average allocation to technology before (November 2025-January 2026) and after (February-April 2026) the announcement. Includes diversified funds (flexi-cap, multi-cap, large and mid-cap, ELSS and value-oriented) with a track record of at least one year. Technology sector classification as defined by Value Research. | |||
LIC MF Value tops the list, more than doubling its tech allocation with a 5.6 percentage point increase. SBI Focused, HDFC Flexi Cap, HDFC Focused and Nippon India ELSS Tax Saver also added to the falling sector, though with more modest moves. Not only did more funds cut tech, but the cuts were also larger in size than the additions.
What this means for you
This data tells you what fund managers did. It cannot tell you who was right.
That answer will come from earnings calls, client budgets and deal pipelines over the next few years. If AI really does hollow out the IT services model, the cautious funds will look prescient. If Indian IT companies adapt by finding new roles in AI implementation and data infrastructure, the funds that bought the dip will have been buying at the right time.
For investors, the takeaway is simple: do not pick a side on the AI debate by chasing or avoiding a particular fund. Diversified funds exist precisely to make these sectoral calls on your behalf. Reshuffling your own portfolio each time the news changes rarely ends well. If your fund holds to its mandate, has a consistent record, and aligns with your goals, staying put is usually the right move.
The IT sector may yet surprise on either side. Your financial plan should not hinge on getting that one call right.
Also read: The market's misreading of Indian IT
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