The cautious stance adopted by fund managers also mirrors broader concerns expressed by brokerages. Analysts at Nomura said the ongoing conflict in the Middle East could have a near-term impact on revenues of Indian IT services companies during the first half of FY27. While the brokerage expects artificial intelligence-related projects to become larger as clients move from proof-of-concept stages to live deployments, it noted that a meaningful acceleration in sector growth would depend on an improvement in global macroeconomic conditions, particularly in the US economy.
The portfolio shift was visible in the sectors that attracted fresh money. Healthcare emerged as the biggest beneficiary, with mutual fund holdings rising by Rs 20,545 crore to Rs 4.17 lakh crore. The sector’s share in total assets increased from 7.66% to 7.97%.
Industrials followed closely, attracting Rs 18,596 crore of additional investments and increasing their share in mutual fund portfolios to 10.52% from 10.29%. Consumer discretionary companies also received net inflows of Rs 13,729 crore, reflecting continued confidence in domestic consumption trends.
The contrast highlights a broader rotation underway in mutual fund portfolios. While export-oriented technology companies face uncertainty due to slowing global spending and geopolitical risks, domestic-facing sectors linked to healthcare demand, infrastructure investment, manufacturing and consumption are drawing greater investor interest.
Notably, the reduction in IT holdings came even though mutual fund ownership as a percentage of the sector’s market capitalisation edged up slightly to 11.22% from 11.16%. This suggests that the decline in the market value of IT stocks may have been steeper than the reduction in mutual fund holdings, pointing to weakness in sector valuations during the month.
Apart from IT, mutual funds also reduced exposure to FMCG and energy stocks. Holdings in FMCG companies fell by Rs 7,794 crore, while energy stocks witnessed a decline of Rs 9,130 crore.