IT sector absent from quarter of India's focused equity funds

India's focused equity mutual funds are increasingly diverging from traditional sector allocations, with a significant portion of schemes avoiding exposure to large-cap IT services companies despite their prominence in domestic equity markets.

Among the focused fund category, which typically holds between 20 to 30 stocks, approximately one-fourth of schemes have eliminated information technology from their portfolios entirely. This strategic exclusion suggests fund managers are either maintaining a cautious stance on IT valuations or prioritising exposure to other sectors they deem more attractive.

The SBI Focused Fund stands as a prominent example of this trend, maintaining no allocation to IT services despite the sector's historical significance in Indian equities. Industry analysts attribute such decisions to varying assessments of IT sector growth prospects and valuation concerns that have periodically weighed on the broader information technology segment.

The focused fund category has gained traction among investors seeking concentrated portfolios with differentiated sector weights compared to broad market indices. This strategy allows fund managers greater flexibility to underweight or exclude sectors entirely based on their investment thesis, even when those sectors represent substantial portions of benchmark indices.

Fund performance data and comparative sector allocations across focused schemes indicate the divergence reflects deliberate portfolio construction choices rather than coincidental gaps in coverage. Investors considering focused funds should evaluate sector weightings carefully, as concentration strategies can significantly impact returns depending on sector performance cycles.