Tech Mutual Funds Crash 18% – Best Time to Invest? Experts Reveal Strategy!
Technology mutual funds have dropped up to 18% in 2025 due to weak earnings and cautious business spending amid global uncertainties. Concerns over a U.S. economic slowdown, rising trade tensions, and inflation-driven policies have led to delays in IT deals, impacting fund performance. Despite the downturn, experts see this as a good entry point for long-term investors, recommending a phased approach through SIPs or STPs instead of lump-sum investments. Most diversified equity funds already have significant tech exposure, so investors should limit dedicated tech fund allocation to 10-15% of their portfolio.
While short-term challenges persist, the long-term outlook remains strong, driven by AI, cloud computing, and digital transformation. Brokerage firms expect IT firms to face seasonal revenue dips but believe valuations are now reasonable with limited downside risk. Sectoral funds like these are best suited for investors with a long-term horizon who understand the risks of market volatility. As always, aligning investments with financial goals, risk tolerance, and portfolio diversification is crucial before making any decisions.
Tech Mutual Funds Crash 18% – Best Time to Invest? Experts Reveal Strategy!
Technology-focused mutual funds have faced a tough year in 2025, with some dropping by as much as 18% due to weak corporate earnings and reduced tech spending by businesses. While this may seem concerning, financial experts believe the current downturn could present a strategic entry point for long-term investors—provided they proceed cautiously and avoid investing large sums all at once.
Why Are Tech Funds Struggling?
The decline in tech mutual funds is largely due to global economic uncertainties. Businesses, particularly in sectors like banking, retail, and manufacturing, have delayed IT investments amid concerns over a potential U.S. economic slowdown. Rising trade tensions and inflation-driven policies in the U.S. have further pressured corporate budgets, leading to cutbacks in technology spending. This has impacted the revenues and profit margins of tech companies, resulting in weaker performance for funds focused on the sector.
Should You Consider Investing Now?
Despite short-term challenges, many analysts view this downturn as an opportunity to enter the tech sector at lower valuations—but with caution. Instead of making a lump-sum investment, experts recommend a Systematic Investment Plan (SIP) or Systematic Transfer Plan (STP) to spread out investments over time and reduce the risk of market volatility.
Sagar Shinde, Vice President of Research at Fisdom, advises investors to limit their exposure to 10-15% of their overall portfolio to manage risk effectively. He also notes that many diversified equity funds already have significant exposure to technology stocks, so a dedicated tech fund may not be necessary for every investor.
How Have Tech Funds Performed Recently?
So far in 2025, technology mutual funds have fallen by an average of 15%, with some experiencing steeper declines:
- Motilal Oswal Digital India Fund: -18.45%
- Aditya Birla SL Digital India Fund: -15.15%
- SBI Technology Opportunities Fund: -12.41%
Over the past six months, tech funds have declined by an average of 13.21%, but the long-term picture remains positive. Over the last year, most funds delivered strong returns, with HDFC Technology Fund gaining 14.11%, while only Quant Teck Fund saw a slight decline of 3.34%.
The Long-Term Outlook for Tech Funds
Despite current headwinds, the technology sector remains a strong long-term bet. Trends like cloud computing, artificial intelligence (AI), data analytics, and automation continue to drive digital transformation worldwide. Indian IT firms, known for their expertise and global presence, are well-positioned to benefit from these shifts once economic conditions stabilize.
Brokerage firms such as Kotak Institutional Equities and Motilal Oswal predict a temporary slowdown in revenue for major IT companies in early 2025 due to seasonal factors and cautious spending. However, they believe current valuations are reasonable, and further significant declines are unlikely.
Who Should Invest in Tech Funds?
Technology mutual funds fall under sector-specific investments, meaning their performance is closely tied to the tech industry’s growth. These funds are best suited for investors who:
- Have a long-term investment horizon (at least five years).
- Understand the risks of investing in a single sector.
- Can tolerate short-term market volatility.
Since many diversified equity funds already include substantial tech holdings, investors should review their existing portfolio to ensure they aren’t overly concentrated in the sector.
Final Thoughts
If you’re considering investing in technology mutual funds, the current market correction could provide a strong entry point—but patience and strategy are crucial. Opt for a phased investment approach using SIPs or STPs instead of making a large one-time investment. Keep your exposure moderate (10-15% of your portfolio) and set realistic return expectations.
Before making a decision, assess your financial goals, risk tolerance, and overall portfolio diversification. While technology remains a high-growth sector, its volatility requires a disciplined and well-informed approach.
Markets fluctuate, but a well-planned investment strategy can help you navigate the ups and downs with confidence.