Technology Sector Funds Plummet Amid Industry Downturn, Diversified Portfolios Show Resilience

Technology Funds Suffer Amid IT Selloff

Category Performance

• Technology funds have declined by 13.45% in the past month and 15.79% so far in 2026.
• The category has delivered an average return of 10.68% over the past three years, but a recent 8.72% one-year drop highlights the risk of sector momentum weakening.

Institutional Portfolio Impact

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• Mutual funds have lost approximately ₹74,052 crore in IT stocks this year.
• Life Insurance Corporation (LIC) has incurred losses of nearly ₹42,500 crore.
• Heavyweights Infosys and TCS account for approximately ₹40,936 crore of mutual fund losses.

Technology Mutual Funds

• Schemes such as HDFC Technology Fund and ICICI Prudential Technology Fund have declined by 16.19% and 15.64%, respectively, over the past month.
• Most funds have posted close to double-digit declines, indicating a broad and sector-wide correction.

Broader Market Performance

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• The Nifty 50 TRI has gained 1.55% in the past month, despite the technology sector correction.
• Over one year, the benchmark has returned 13.99%, with a year-to-date decline of only 2.59%.
• The Nifty 50 TRI has delivered 14.64% returns over three years, outperforming the IT index's 1.65% returns.

Large-Cap Fund Performance

• Returns across the large-cap category have ranged between 9% and 20% over the past year, with several schemes clustering in the 12-16% band.
• Large-cap funds have seen mild declines, largely between flat and -3.5%, in contrast to technology funds that have declined by 11-18%.

Diversification Advantage

• Flexi-cap funds have limited downside even amid volatility, thanks to their flexibility to shift across sectors and market caps.
• The Nifty 500 TRI, a proxy for diversified market exposure, has delivered 14.93% returns over one year and a 2.26% decline in 2026.

Allocation Lesson for Investors

• Experts recommend that sector funds form part of a satellite allocation and may involve some degree of market timing.
• Diversified funds may not deliver the sharpest rallies, but their ability to balance opportunities across sectors often provides stability when cycles turn.