Mutual funds reduce investments in IT stocks in February, weight slips to 8 year low

In February, mutual funds significantly reduced their investments in the IT sector, with the allocation dropping to its lowest level in eight years, according to a report by Motilal Oswal Financial Services. The weight of IT stocks in mutual fund portfolios fell from 8.3% in January to 6.9% in February, marking a decrease of 140 basis points month-over-month and 260 basis points year-over-year. The technology sector experienced the steepest decline, with a 16.1% drop in value, affecting major companies like Infosys, TCS, and HCL Technologies. Notably, Infosys and TCS saw declines of 16.6% and 13.9%, respectively, despite some mutual funds increasing their holdings in these stocks. Foreign institutional investors also pulled back, offloading approximately Rs 17,000 crore worth of IT stocks throughout the month. This trend reflects rising concerns regarding market volatility and a broader reassessment of the technology sector's prospects, with analysts like Jefferies downgrading several key stocks in the industry. Despite the downturn, some mutual funds, such as PPFAS, continued to invest in leading IT companies, indicating a mixed sentiment towards the sector. As the market navigates these challenges, the future of IT investments remains uncertain, warranting close attention from investors.