Mutual funds slash stakes in 9 of 10 IT stocks but Rs 4 lakh crore still at play

In January 2026, Indian mutual funds significantly reduced their investments in the technology sector, divesting from 9 of the top 10 IT stocks amid concerns that artificial intelligence (AI) may disrupt the traditional outsourcing model that has underpinned the $250 billion industry. Data from Prime Database indicates that mutual funds held approximately Rs 395,404 crore in IT stocks, down from Rs 397,310 crore in December 2025. Major companies such as Oracle Financial Services Software, Wipro, TCS, and Coforge witnessed a decline of at least 30% from their 52-week highs, with Infosys and HCL Tech seeing drops of 27% and 18%, respectively. ICICI Prudential Asset Management Company was at the forefront of this selling trend, offloading substantial shares in Infosys, TCS, and HCL Tech. Analysts, including Ruchi Mukhija from ICICI Securities, predict that while IT services will remain relevant, their position is weakening as AI-driven capital increasingly shifts towards infrastructure and software, potentially leading to further valuation declines. Current trading multiples for large-cap IT stocks remain elevated compared to historical averages, raising concerns about the long-term sustainability of their market value as AI technologies continue to deliver significant productivity gains across various IT functions.