MF IT Exposure Hits a Record Low of 5.3% — What It Means for Your SIP

QUICK ANSWER: Indian mutual funds' IT exposure fell to a record-low 5.3% of equity assets in September 2026 (from 7.6% at end-2025 and 9.24% at end-2024), reported The Economic Times on 19 October 2026 citing Prime Database data. The pullback reflects AI-disruption fears and IT de-rating. Curiously, SIP inflows hit a record ₹32,490 crore the same month.

Why your mutual fund suddenly owns a lot less IT

On 19 October 2026, The Economic Times reported that Indian mutual funds' exposure to Information Technology stocks fell to an all-time low in September 2026: just 5.3% of their equity assets under management (AUM), according to Prime Database data.

For context, IT accounted for 7.6% of mutual funds' equity AUM at the end of 2025, 9.24% at the end of 2024, and a record 13.4% at the end of 2021. In value terms, the industry's IT holdings shrank by about 25% to ₹2.97 lakh crore in September from ₹3.98 lakh crore in December 2025. The value of those holdings had touched a record ₹4.03 lakh crore as recently as November 2025.

The shift is not just about selling. Infosys, which was among the five largest mutual-fund holdings at the start of 2026, slipped to 10th place by September. TCS slid from 10th in 2024 (and among the top 14 in 2025) to 18th. HCLTech fell from 20th to 25th and Tech Mahindra from 25th to 31st. Wipro's slide was the sharpest of all: from 88th at the start of 2026 to 316th in September, having been 56th in 2024.

If you hold a flexi-cap, large-cap or multi-cap fund — or a technology fund — there is a good chance your portfolio's IT weight looks very different today than it did a year ago. Here is what the numbers actually mean, and what questions they raise for a regular SIP investor.

Why fund managers are cutting IT

Three concerns are driving the pullback, per the reporting:

1. AI disruption fears. Many fund managers have cut exposure because of uncertainty over how deeply artificial intelligence could disrupt the software-services industry — particularly the labour-intensive application development and maintenance work that underpins Indian IT revenue.

2. Weak global client spending. With clients in the US and Europe cautious on budgets, growth visibility has stayed muted.

3. De-rating, not collapse. Harsh Thakkar, equity research analyst at Samco Securities, told ET that "the correction in Information Technology stocks during 2026 has been a de-rating story more than an earnings story." Revenue growth, he said, "has remained muted but has not collapsed" — but valuations fell sharply as investors priced in the threat AI agents pose to the application development and maintenance business model.

That distinction matters. A de-rating means investors are willing to pay a lower multiple for the same earnings, often on fear of future disruption. It is different from a business that is already losing money.

That caution was visible again in the very next trading session: on Monday 19 October, IT stocks came under fresh pressure during the day's broad sell-off, with Infosys closing 2.6% lower, per the Financial Express market report — a live illustration of the nervous professional sentiment the September allocation data captured.

The paradox: fund managers sold while SIP investors bought

Here is the twist that makes this story worth reading twice. In the very same month that industry IT exposure hit its record low, retail SIP investors set a record of their own: SIP contributions reached an all-time high of ₹32,490 crore in September 2026, up from ₹32,297 crore in August, according to data released by the Association of Mutual Funds in India (AMFI) on 12 October 2026.

Equity mutual funds took in ₹38,306.55 crore of net inflows — up 31% month-on-month, a five-month high, and the 67th consecutive month of positive equity inflows. Small-cap funds led with ₹9,038.57 crore, followed by mid-caps at ₹7,834.84 crore and flexi-caps at ₹6,701.80 crore. Around 6.3 million new SIPs were registered in the month, and the SIP stoppage ratio fell for the fifth straight month, to 78.53%.

So the professionals were cutting IT while the public kept its SIPs running. Who is right? The honest answer is that both can be — they are playing different games. Fund managers rotate between sectors on 12- to 18-month views. A typical SIP investor is investing for goals a decade or more away. Short-term sector calls by professionals and long-term SIP discipline by individuals can coexist without contradicting each other.

The detail the headlines miss: managers actually bought more shares

This is the part most coverage skips, and it changes the interpretation. While IT's percentage weight in portfolios fell, mutual funds actually increased the number of shares they hold in several IT names:

• Infosys: holdings up 2.7 crore shares to 86 crore (from 83.4 crore in December 2025)
• TCS: holdings up 61 lakh shares to 20.64 crore (from around 20 crore)
• HCLTech: holdings up 1.8 crore shares to 26.4 crore (from 24.6 crore)

Only in Tech Mahindra (down 45 lakh shares to 18.97 crore) and Wipro (down 33.96 crore shares to 17.42 crore) did share counts fall substantially.

How can a fund own more shares of a company while the stock's weight in the portfolio falls? Simple arithmetic: a sector's weight is (share price × shares held) divided by total equity assets. IT share prices fell hard this year — the Nifty IT index shed about 28% in 2026 through 8 October, against the Nifty's 14% decline. When the numerator (price) falls faster than the number of shares rises, the weight drops. And with SIP money pouring in, the denominator (total equity AUM) kept growing, which mechanically dilutes every sector's share.

An illustration: if your fund held ₹76 of IT for every ₹1,000 of equity at the end of 2025, and now holds ₹53 of IT for every ₹1,000, that 2.3-percentage-point fall came mostly from IT prices falling — not from a fire sale of shares.

De-rating or value? Two professional reads

The industry itself is split, which is worth knowing before you draw conclusions:

• The cautious read (Samco's Thakkar): the threat is real enough to justify lower multiples, even if earnings have not collapsed. AI agents could compress margins in the ADM business.
• The constructive read: Kunal Bajaj, research analyst at Choice Institutional Equities, pointed to "promising management commentary, the anti-AI trade turning favourable for Indian IT companies and valuations that are very reasonable at the moment, below their five-year average and closer to the 10-year average." Notably, the Nifty IT index ran up 11.7% in the week after 8 October — its biggest weekly gain in 18 years — as AI-related semiconductor stocks sold off elsewhere in Asia.

When professional managers publicly disagree, the takeaway for an individual investor is caution about treating any single data point as a signal to act on.

What it means for your SIP: three practical checks

Rather than copying fund managers' sector calls — which are made for institutional mandates, not your goals — investors often consider these checks:

1. Know your own IT exposure. Your fund's sector mix is public: every scheme publishes a monthly portfolio disclosure on its website, and your Consolidated Account Statement (CAS) lists your holdings. A quick scan shows whether IT is 4% or 24% of your portfolio. The industry average of 5.3% may not match your fund at all — sectoral and technology funds, obviously, look nothing like the average.

2. Ask what role the IT exposure plays. In a diversified flexi-cap fund, IT is one slice of a broad portfolio that the manager actively adjusts. In a technology-sector fund, IT is the portfolio. These are very different risk profiles, and the news matters very differently to each. Investors often review whether the reason they bought a fund (diversified growth vs. a sector bet) still holds.

3. Match any change to your goal, not the news cycle. One approach investors use: they only act on portfolio news when their goal timeline, risk capacity or asset allocation has actually changed — not because a sector weight moved in an industry report. Chasing professional sector rotation with a monthly SIP usually means buying whatever just ran up, the opposite of what SIPs are designed to do.

A final perspective on timing: today's Dussehra market holiday (NSE and BSE are closed on 20 October 2026, resuming 21 October) is a reminder that markets will still be there after the headlines fade. Sector weights move every month; SIPs compound over years.

This article is for educational purposes only and is not financial advice. Please consult a SEBI-registered investment adviser for personalized guidance. Investments are subject to market risk.

Sources

• The Economic Times, "Mutual fund holdings of IT stocks sink to record low in September", published 19 October 2026 (data: Prime Database).
• The Economic Times Markets live blog, 19 October 2026 (IT exposure context).
• 5paisa, "Mutual Fund Exposure to IT Stocks Falls to Record Low in September 2026", October 2026.
• IANS, "SIP inflows hit all-time high of ₹32,490 crore in September: AMFI data", 12 October 2026 (AMFI data released 12 Oct 2026).
• ET Now News, "Small Cap Mutual Funds: inflows hit ₹9,039 cr", updated 12 October 2026 (AMFI September 2026 equity inflow data).
• 5paisa, "Equity Mutual Fund Inflows Rise 31% to ₹38,307 Crore in September", 13 October 2026 (AMFI September 2026 data).
• Equitymaster, "What the Latest AMFI Data Says About Mutual Fund Investors' Behaviour", 15 October 2026 (6.3 million new SIP registrations; SIP stoppage ratio 78.53%).
• The Financial Express, "Share Market Today LIVE, 19th October 2026" (Nifty IT intraday −1.54%; Infosys close −2.6% on 19 Oct).
• NDTV / Business Today / Economic Times, "Stock market holiday on Dussehra, October 20, 2026" (NSE/BSE closed 20 Oct 2026; Monday 19 Oct close: Sensex 73,852.90 −876.37, Nifty 22,888.95 −257.20).