---
title: "Mutual Funds Cut IT Exposure to an Eight-Year Low of 6.7% — Infosys and TCS Trimmed"
description: "Fund managers have reduced technology allocations to 6.7%, an eight-year low, exiting Infosys and TCS in June 2026 on AI-disruption fears and weak IT spending. What it means for investors."
author: "emma-carter"
published: "2026-07-19T00:00:00.000Z"
tags: ["mutual-funds","it-sector","markets","sector-allocation","stocks"]
canonical: "https://smartmoney.report/blog/posts/mutual-funds-cut-it-exposure-to-eight-year-low-infosys-tcs-trimmed"
---

Indian equity mutual funds have cut their technology-sector exposure to 6.7% — the lowest in eight years — with June 2026 portfolio disclosures showing continued trimming, including exits from Infosys and TCS. The rotation reflects AI-disruption fears, weak global IT spending and a decisive preference for domestic sectors like financials.

An eight-year low is not a routine underweight; the last time fund managers held this little IT, the sector was about to begin one of its strongest runs. That history is why the number is worth understanding rather than simply extrapolating.

## Why are managers abandoning IT?

Four arguments dominate fund commentary. First, AI anxiety: the fear that automation compresses the people-per-project economics of Indian IT services. Second, cyclical weakness — global IT spending remains soft, deal closures are delayed and earnings growth is muted. Third, opportunity cost: domestic-facing sectors (financials, manufacturing, defence) offer earnings visibility that exporters currently lack. Fourth, momentum — once a sector de-rates, benchmark-hugging careers punish early re-entry.

June's disclosures show the trade continuing but turning selective: even as headline exposure sat near the lows, some funds bought IT alongside financials and FMCG while foreign investors sold — a hint that the one-way phase may be maturing.

## What does an eight-year-low weighting actually imply?

| Signal (as of June–July 2026) | Reading |
|---|---|
| MF technology allocation | 6.7% — lowest since ~2018 |
| Notable June exits | Infosys, TCS |
| Managers' stated concerns | AI disruption, weak IT spend, delayed deals |
| Preferred alternatives | Financials, manufacturing, defence |
| Early counter-signal | Tech Mahindra Q1 profit +28.4%; stock +3.91% |

Extreme positioning cuts both ways. It tells you the bad news is widely believed — and therefore substantially priced. When Tech Mahindra reported a 28.4% profit rise to ₹1,465 crore on July 17 with an upbeat outlook, the [entire sector rallied](/blog/posts/sensex-nifty-weekly-wrap-july-17-2026-it-and-financials-power-gains) in a day. Light positioning is dry tinder: it takes little good news to move prices when almost nobody owns the sector at full weight.

## What should fund investors take from this?

Three practical reads. If you hold diversified equity funds, this rotation has already been executed for you — that is the manager's job, and no action is needed. If you hold a dedicated IT sector fund, understand that you now own a consensus underweight: returns will hinge on earnings inflection, not sentiment, and [sector funds demand conviction and timing](/blog/posts/thematic-and-sector-mutual-funds-when-to-invest-and-when-to-avoid) that most portfolios are better off without. And if you are tempted to trade the contrarian side, size it as a satellite position — being early on a sector turn is indistinguishable from being wrong for uncomfortably long.

The mirror image of this story — where the money went — is covered in our report on [mutual funds' financials buying](/blog/posts/mutual-funds-make-financials-their-biggest-sector-purchase-9296-crore-in-june).

Portfolio-weight figures are as of April–June 2026 disclosures; monthly portfolio data is published with a lag and the next update lands in mid-August.

## Sources

1. [Mutual funds cut tech exposure to 6.7% at 8-year low](https://www.newsbytesapp.com/news/business/mutual-funds-cut-tech-exposure-to-67-at-8-year-low/tldr) (NewsBytes) - checked 2026-07-19
1. [Mutual Funds Buy Into Financials, IT And FMCG As FIIs Sell In June](https://www.5paisa.com/news/mutual-funds-buy-into-financials-it-and-fmcg-as-fiis-sell-in-june) (5paisa) - checked 2026-07-19
1. [Activities of Equity Mutual Fund Schemes — June 2026](https://matasec.substack.com/p/activities-of-equity-mutual-fund-e85) (Matasec) - checked 2026-07-19