Different Strokes: Four Fund Managers On How They Are Playing Indian IT

Four fund managers who run technology-focused schemes are betting on Indian IT's recovery from artificial intelligence disruption, but each is playing the sector differently, from how much US technology they hold to how much cash they keep in reserve, according to a report in Value Research's Mutual Fund Insight report.

The BSE IT index has fallen about 24% over the past year, wiping out five years of gains and turning what was once the market's steadiest compounder into one of its worst performers. None of the four managers believes the sector is finished, but their portfolios show sharply different responses to the same downturn. That divergence shows up clearly in their portfolios.

Sumanta Khan's Edelweiss Technology fund carries the highest exposure to US technology stocks, at nearly 27%, a bet he acknowledged would be hit hardest if AI valuations turn out to be a bubble. Meeta Shetty's Tata Digital India fund holds no US stocks at all, a stance she called a deliberate, true-to-label position, and has kept active cash as high as 10-12% in the past as ammunition for a recovery. Shibani Sircar Kurian's Kotak Technology fund, by contrast, does not use cash as an allocation tool at all, keeping it at 2-5% purely for liquidity.

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Vaibhav Dusad of ICICI Prudential Mutual Fund said his own growth expectations for the sector have only been trimmed modestly, from 6-8% a year to 5-7%, even as share prices now price in something close to no growth at all. Shetty said AI is attacking the industry's core model directly: more engineers used to mean more billable hours and more revenue, and AI lets clients get the same work done with fewer people.

All four managers argued the sector has weathered comparable shocks before, including the shift to cloud computing, without disappearing. Shetty pointed to one large Indian IT company whose digital revenue grew from $2 billion to $13 billion in six years even as clients feared cloud migration would gut its legacy business.

How fund managers are playing the AI hit, beaten down, IT sector
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Kurian and Sumanta Khan expect the transition to reward stock-picking, arguing the sector will grow more heterogeneous, with clear winners and losers as firms shift from selling time to selling outcomes. Kurian said the revenue mix at large IT firms is now roughly half time-and-materials, with the rest on outcome-based or fixed-price contracts. Dusad disagrees, expecting most companies to eventually converge on similar business models with some lag.

Performance has diverged sharply over the past year: Khan's fund returned 3.8%, the only one of the four in positive territory, while Dusad's, Shetty's and Kurian's funds fell between 15% and 17%. The common thread across all four managers is that investors need to understand which specific bet their fund is making, rather than treating technology funds as interchangeable.

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