Index Fund Corner
Sponsored
| Scheme Name | 1-Year Return | Invest Now | Fund Category | Expense Ratio |
|---|---|---|---|---|
| Axis Nifty 50 Index Fund | +32.80% | Invest Now | Equity: Large Cap | 0.12% |
| Axis Nifty 100 Index Fund | +38.59% | Invest Now | Equity: Large Cap | 0.21% |
| Axis Nifty Next 50 Index Fund | +71.83% | Invest Now | Equity: Large Cap | 0.25% |
| Axis Nifty 500 Index Fund | — | Invest Now | Equity: Flexi Cap | 0.10% |
| Axis Nifty Midcap 50 Index Fund | +46.03% | Invest Now | Equity: Mid Cap | 0.28% |
Indian IT mutual funds, which invest primarily in tech companies, have managed to navigate a challenging macro environment.
Shibani Sircar Kurian, Executive Vice President and Head of Research at Kotak Mahindra Asset Management Company (AMC), believes that the sector’s long-term relevance is driving this resilience.
“The need for technology is universal across businesses. Even as the sector faces near-term uncertainty due to tariff and trade issues, we see the demand for digital services as long-term and structural,” she notes.
Here’s a look at returns of some of the IT funds:
| Fund Name | 1Y Return (%) |
| HDFC Technology Dir | 14.24% |
| Edelweiss Technology Dir | 6.70% |
| HDFC Nifty India Digital Index Dir | — |
| ABSL Nifty IT ETF | 4.22% |
| Axis NIFTY IT ETF | 4.21% |
| HDFC NIFTY IT ETF | 4.26% |
| DSP Nifty IT ETF | 4.27% |
| Bandhan Nifty IT Index Dir | 4.17% |
| Axis Nifty IT Index Dir | 4.03% |
| ABSL Digital India Dir | 4.00% |
| Franklin India Technology Dir | 3.24% |
(Source: Value Research)
Historically, the IT sector has remained steady except during major global recessions such as in 2000–01, 2008–09, and 2020–21.
Outside of those periods, growth in IT services has been consistent.
Kurian points out that most companies in the sector generate free cash flow, have healthy return on equity (ROE), and offer attractive dividend yields.
These fundamentals act as a cushion during market downturns, supporting valuations.
Momentum to continue?
While near-term predictions remain uncertain, Kurian says Indian IT firms are relatively well placed over the long term. However, the sector is not immune to global risks.
Key factors to monitor include:
- The severity of tariffs and countermeasures by the US and other countries.
- Global consumer and business sentiment.
- The US dollar index (DXY).
- Geopolitical developments, especially the Russia–Ukraine conflict.
- US GDP growth, which drives discretionary tech spending.
Kurian adds, “Verticals like BFSI, retail, hi-tech, and manufacturing will be crucial. Revenue exposure to these and the possibility of earnings revisions must be tracked. That said, when growth returns, the rebound in IT services demand could be swift.”
AI, cloud to drive the next phase
In terms of future growth themes, Kurian points to artificial intelligence (AI), generative AI, and cloud migration as major structural drivers.
“To adopt AI at scale, enterprises first need to move and streamline large volumes of data via the cloud,” she explains. “So, AI adoption and cloud integration will be long-term growth levers, much like digital transformation was a few years ago.”
Should retail investors consider IT funds?
Kurian advises that sectoral funds like IT should ideally be part of a diversified investment strategy and not a standalone bet.
“For investors already holding diversified equity funds, IT funds can offer exposure to a sector with long-term potential. But this should be aligned with their risk appetite and goals,” she says.
She emphasises the need for a long-term approach. “Technology is a structural story. Investors should come with a minimum time horizon of at least five years.”
For retail investors planning to start a systematic investment plan (SIP) in IT funds, Kurian suggests a disciplined long-term strategy.
“Given the inherent volatility, SIPs in IT funds should be made with a horizon of more than five years to ride through cycles and benefit from compounding.”
ALSO READ | RBI rate cuts may make G-Sec ETFs attractive: LIC Mutual Fund’s Ravi Jha explains why