Nifty IT Index falls 28% in a year: Should investors buy the dip or remain cautious?

The nearly 28% correction in the Nifty IT Index over the past year has revived debate over whether investors should consider sector-specific IT index funds.

The discussion has gained traction after Accenture recently lowered its growth outlook and reported weaker outsourcing bookings, raising concerns about global technology spending and the impact of artificial intelligence (AI) on traditional IT services.

Let's find out what experts have to say and whether you should consider investing in IT index funds at this point.

Experts broadly agree that Nifty IT Index Funds should not be viewed as core portfolio holdings, but opinions differ on whether the current correction offers a favourable entry point.

According to Nirali Bhansali, Equity Fund Manager at Samco Mutual Fund, investors should remain cautious amid significant structural changes in the sector.

“For decades, large IT services companies benefited from business models built around outsourcing manpower intensive work, given the labour arbitrage, application maintenance and digital transformation projects. Given the pace of AI's evolution, it is beginning to challenge some of these revenue streams for traditional IT companies. Therefore, at this juncture, retail investors should exercise caution before investing in Nifty IT Index Funds.”

However, Nishchal Jain, Quant Researcher at Share.Market by PhonePe believes the ongoing correction may offer a long-term accumulation opportunity.

“Retail investing in the Nifty IT Index currently requires a shift from panic to structural discipline. Because sectoral funds are inherently cyclical and volatile, retail investors should avoid risky lump-sum bets and instead utilise Systematic Investment Plans (SIPs) to average out near-term fluctuations while accumulating India's core tech leaders at reasonable prices.”

Tanvi Kanchan, Associate Director at Anand Rathi Share & Stock Brokers, says investors must understand that a Nifty IT Index Fund is essentially a concentrated bet on a handful of large-cap IT companies.

“For retail investors, it depends on time horizon, not headline sentiment. Index funds tracking Nifty IT give exposure to the same five-six dominant names — TCS, Infosys, HCL Tech, Wipro, Tech Mahindra and LTIMindtree make up the bulk of the index weight — so an investor is effectively making a concentrated bet on large-cap IT services, not a diversified technology bet.”

Gaurav Arora, Head of Research at Sahi, also believes the sector should be viewed as a tactical allocation rather than a core investment.

“A Nifty IT index fund is best treated as a tactical, satellite allocation, not a core holding. After a roughly 32% fall in 2026, the index trades near 19x earnings, below its historical averages. That makes it a contrarian, value-zone idea for investors with a 3-5 year horizon who can stomach concentration and further drawdowns, ideally accumulated via SIPs and sized small. It is not suited to those seeking quick gains.”

Accenture's recent commentary has become a focal point for investors evaluating the health of the global IT services industry.

Bhansali says the warning reinforces concerns already in the market.

“Accenture's recent caution reinforces concerns that were already present rather than introducing a new worry for the sector. The company's softer revenue growth outlook and weaker outsourcing bookings suggest that global enterprises remain cautious about discretionary technology spending.