Mutual Funds Reduce IT Exposure as Market Volatility Shifts Capital to Industrials

Mutual fund managers in India have significantly reduced their exposure to the Information Technology (IT) sector during May 2026, opting instead to reallocate capital into healthcare and industrial segments. This reallocation reflects a growing desire for defensive positioning amidst heightened market volatility and sector-specific concerns regarding valuations. Analysts suggest that fund managers are increasingly looking for value opportunities outside the growth-heavy tech landscape.

The move comes alongside a broader debate on the efficacy of factor investing, with experts evaluating the long-term utility of momentum, low volatility, and quality-based strategies. Some financial advisors have highlighted that while certain sectors have underperformed for up to two years, the current business cycle may present a unique window for sector-specific exposure. Expert perspectives, including those from fund managers at firms like Axis AMC, emphasize the importance of identifying growth triggers within specific business cycles rather than relying on broad market sentiment.

The pivot toward industrial and healthcare sectors indicates a tactical hedge against the recent volatility seen in tech-linked stocks. For retail investors, the shift underscores the relevance of diversified portfolio management. Financial experts recommend that investors look at business cycle funds to navigate these sectoral opportunities as the market appears to be on the cusp of a potential trend reversal.