MFs Rebuild Tech Bets Post 67-Month Low
Mutual funds houses have warmed up to on IT stocks in October, reversing months of cautious positioning after the sector hit a 67-month low in September, according to a Motilal Oswal mutual fund monthly report. The pivot comes squarely on the back of better-than-expected Q2 earnings, where large Indian IT firms surprised on revenue, margins, and deal momentum despite a still-soft global tech spending environment.
Fund managers, who had steadily trimmed exposure through most of the year amid demand uncertainty, began adding to technology portfolios as sequential growth returned across key verticals such as BFSI, manufacturing and energy.
Infosys delivered one of the strongest topline numbers of the quarter, while TCS maintained broad-based stability. This shift was visible in fund positioning: technology weight in mutual fund portfolios rose to 7.6 percent in October, inching up 10 basis points month-on-month, even though it remains lower year-on-year.
The sector’s allocation uptick indicates that fund managers are positioning ahead of a potential medium-term recovery, supported by improving cloud modernisation deals and a growing funnel of AI-linked projects.
Auto weights cool off after 3 months
Even as IT regained favour, automobile stocks saw a moderation in mutual fund weightings after rising for three straight months. The sector, which had climbed to a three-month high, eased to 8.3percent in October, down 40 basis points on a monthly basis. The pullback comes partly to profit-taking after a strong run-up and partly to a near-term soft patch in festive-season retail trends for some categories. While underlying demand remains healthy for passenger vehicles and premium two-wheelers, fund managers appear to be rotating capital selectively as valuations in certain auto sub-segments stretch.
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October also saw incremental flows into NBFCs, oil & gas, PSU banks, telecom and consumer durables, though these changes were more measured and stock-specific. NBFC allocations rose to a 21-month high of 5.9 percent, supported by steady credit growth and stable asset quality, while oil & gas weights climbed to a four-month high, reflecting improved sentiment around refining margins and gas pricing visibility.
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Conversely, utilities, cement, chemicals and textiles witnessed moderated positions. Sectoral ownership relative to the BSE 200 showed that mutual funds remained overweight healthcare, consumer durables, chemicals, NBFCs and capital goods, while continuing to stay underweight oil & gas and consumer sectors, where 17 funds remained below benchmark allocations.
Despite the churn across sectors, October’s standout theme was unambiguous: Q2 outperformance has reignited confidence in IT, prompting fund managers to rebuild positions after a multi-year low. With earnings stabilising, deal pipelines improving and AI-led spends forming a larger share of future revenue, IT is once again emerging as a preferred pick in a market increasingly rewarding stability and visibility.
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