The Indian Information Technology (IT) sector continues to be an essential driver of the nation’s economic growth and innovation. For investors seeking focused exposure to technological advancement, IT sector mutual funds offer an attractive investment opportunity. With the sector expected to reach a valuation of $350 billion by the end of December 2025, the relevance of sector-specific funds is only expected to grow. Technology spending in India is projected to increase by 11.2% to nearly $160 billion during the same period, propelled by developments in artificial intelligence, cloud computing, and digital transformation initiatives.
IT sector mutual funds are a category of equity mutual funds that invest at least 80% of their assets in companies operating within the information technology domain. These companies may span across IT services, software development, telecommunications, hardware production, and emerging technology fields such as cybersecurity, data analytics, artificial intelligence, and blockchain.
In line with the Securities and Exchange Board of India (SEBI) mutual fund categorisation norms, sectoral funds fall under equity-oriented schemes with a mandated 80 percent minimum investment in equity and equity-related instruments from a specific sector. This concentrated approach enables investors to benefit from targeted sectoral growth while still maintaining diversification within technology-related industries.
The scope of technology in India is extensive, encompassing established firms like Tata Consultancy Services Limited (TCS), Infosys Limited, and HCL Technologies Limited, as well as high-growth mid-cap and small-cap companies innovating in areas such as fintech, cloud infrastructure, and enterprise solutions.
IT sector mutual funds collect capital from multiple investors and allocate it across a curated portfolio of technology companies. Fund managers analyse macroeconomic conditions, regulatory policies, and global technology demand to construct an optimal portfolio.
The process typically begins with a Scheme Information Document (SID), wherein the fund’s objectives, strategy, risk profile, and benchmark are defined. Fund managers then assess companies based on fundamentals such as earnings potential, market position, innovation pipeline, and resilience during technology shifts.
These funds often include a mix of large-cap stability, mid-cap flexibility, and small-cap growth potential. Active monitoring, timely rebalancing, and tactical shifts between sub-segments like cloud services, AI, or cybersecurity ensure the portfolio remains responsive to market dynamics.
Investors can access these funds via systematic investment plans (SIPs), lump sum investments, or systematic withdrawal plans (SWPs), thereby offering flexibility and accessibility. Performance is reflected in the fund’s Net Asset Value (NAV), which fluctuates based on underlying stock prices.
Based on assets under management (AUM), consistency of performance, and the track record of fund managers, the following funds emerge as top contenders in 2025:
| Fund Name | AUM (₹ Cr) | 1-Year Return | 3-Year Return | 5-Year Return |
| ICICI Pru Technology Fund | 14,590 | 0.9% | 16.1% | 25.9% |
| Tata Digital India Fund | 12,216 | -3.8% | 16.1% | 24.0% |
| Aditya Birla SL Digital India Fund | 5,001 | -2.9% | 16.0% | 23.7% |
| SBI Technology Opportunities Fund | 4,829 | 7.1% | 19.1% | 24.6% |
| Franklin India Technology Fund | 1,949 | -1.7% | 23.0% | 21.8% |
| HDFC Technology Fund | 1,470 | 4.1% | – | – |
| Motilal Oswal Digital India Fund | 830 | – | – | – |
| Edelweiss Technology Fund | 687 | 1.9% | – | – |
| Kotak Technology Fund | 620 | -0.4% | – | – |
| ICICI Pru Nifty IT Index Fund | 549 | -5.9% | – | – |
*Note: Several newer funds lack long-term historical performance data.
Who should consider investing in IT Sector Mutual Funds?
Investors with a high risk appetite: Technology funds are inherently more volatile than diversified equity funds. The sector can experience periods of rapid growth as well as significant drawdowns. As such, these funds are more suited to investors who are comfortable taking on higher risk for the potential of superior long-term returns.
Long-term investors: Given the cyclical nature of the IT sector, a long-term investment horizon of seven to ten years is recommended. This allows investors to ride out market volatility and benefit from structural changes in the global digital economy.
Technology-savvy investors: Individuals who understand the technology space or have a keen interest in emerging tech trends may find it easier to assess the quality of the underlying portfolio. Such investors are also better positioned to evaluate shifts in the sector.
Portfolio diversifiers: Investors looking to add a layer of thematic diversification to their existing portfolio may consider allocating 10 to 15 percent of their investments to IT sector funds. This enables exposure to innovation-led growth while maintaining balance.
SIP investors: Given their volatility, these funds are well-suited for systematic investment plans (SIPs). SIPs help mitigate timing risk by averaging purchase costs during both high and low market phases.
The Indian IT sector presents a strong structural growth story backed by rising global demand, a skilled workforce, and rapid domestic digitalisation. While 2025 has seen some turbulence, with sectoral funds averaging losses of around 14%, the long-term investment case remains intact.
Investors must be aware that sectoral funds are not substitutes for diversified equity funds. Instead, they serve as high-conviction thematic allocations for investors who are confident in the long-term trajectory of the technology sector. Funds such as ICICI Prudential Technology Fund, Tata Digital India Fund, and Franklin India Technology Fund offer solid track records, experienced management, and compelling returns. Meanwhile, newer entrants like HDFC Technology Fund and Motilal Oswal Digital India Fund provide fresh perspectives and access to emerging opportunities.
A disciplined SIP strategy, appropriate risk management, and a well-defined investment horizon can help investors harness the long-term potential of IT sector mutual funds while mitigating short-term volatility.
For android only