5 Equity Mutual Funds Having Higher Exposure to Artificial Intelligence (AI) Stocks

Jun 27, 2023 / Reading Time: Approx. 8 mins

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Artificial Intelligence (AI) appears poised to be the driver of future technologies. The emergence of generative AI such as ChatGPT has shown the potential the technology holds -- right from carrying out mental processes like judgment, problem-solving, perception, to human communication in various languages. AI is expected to change the way people shop, manage their schedules, entertain themselves, get customer support, and carry out many other tasks.

AI is playing a pivotal role in enhancing outcomes in various key sectors such as healthcare, education, agriculture, automobile, and finance by automating routine tasks and using predictive analytics for improved decision-making.

AI is expected to become more sophisticated in the coming years. With the betterment of machine learning and improving computing power, the possibilities of what AI can do is endless!

5 Equity Mutual Funds Having Higher Exposure to Artificial Intelligence (AI) Stocks
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PM Narendra Modi's recent three-day visit to the USA saw a flurry of mega announcements in various fields. During the visit, US President Joe Biden announced technology corporation with India in areas such as Artificial Intelligence, space mission, quantum computing, and telecommunications. This is expected to take technological advancements in India to new highs.

According to the National Association of Software and Service Companies (NASSCOM), given India's strong IT industry, AI-based utilities can leverage huge potential in the country. It expects AI to contribute an additional US$ 957 billion (bn) to India's economy by 2035.

Investors too may benefit from the booming technology wave as various equity mutual funds hold significant exposure to AI stocks.

In this article, we will look at 5 diversified equity mutual funds having higher exposure to Artificial Intelligence (AI) stocks.

#1: Parag Parikh Flexi Cap Fund

Launched in May 2023, Parag Parikh Flexi Cap Fund is a popular scheme in the Flexi Cap Fund category known for its value-oriented investment approach. The fund has the flexibility to invest across large-cap, mid-cap and small-cap stocks.

As of May 31, 2023, Parag Parikh Flexi Cap Fund allocated 56.3% of its assets in large caps, about 4.1% in mid caps, 6.9% in small caps, 18.3% in overseas equities, and the balance in cash and debt.

Top AI stock holdings of Parag Parikh Flexi Cap Fund

Data as of May 31, 2023
(Source: ACE MF)
 

Parga Parikh Flexi Cap Fund holds exposure to foreign entities such as Microsoft Corp, Alphabet Inc, Amazon.com, and Meta Platforms that have been at the forefront of various tech innovations, including AI. These stocks collectively account for 18.3% of its assets as of May 31, 2023.

#2: Axis Growth Opportunities Fund

Launched in October 2018, Axis Growth Opportunities Fund is categorised as a Large & Midcap Fund. The fund invests predominantly in large cap and mid cap stocks, plus diversifies the portfolio with offshore equities.

As of May 31, 2023, Axis Growth Opportunities Fund holds 36.9% of its assets in large caps, 37.2% in mid caps, 3.8% in small caps, about 17.6% in overseas equities/ADRs & GDRs, and the balance in cash and equivalents.

Top AI stock holdings of Axis Growth Opportunities Fund

Data as of May 31, 2023
(Source: ACE MF)
 

Axis Growth Opportunities Fund holds a mix of domestic and foreign AI stocks. Tata Elxsi, a medium-sized IT firm well-known for its design and engineering capabilities, has the highest allocation, followed by Microsoft Corp, Persistent Systems, and Alphabet Inc. These AI stocks collectively form 9.3% of the fund's net assets.

#3: Kotak Small Cap Fund

Kotak Small Cap Fund aims to invest in small-sized companies having the potential to grow in size and become future market leaders. Initially launched as a Mid Cap Fund in February 2005, Kotak Small Cap Fund now holds a small-cap biased portfolio along with significant exposure to midcaps.

As of May 31 2023, Kotak Small Cap Fund has an allocation of about 67% in small caps, 22.6% in mid caps, 5.3% in large caps, and the balance in cash.

Top AI stock holdings of Kotak Small Cap Fund

Data as of May 31, 2023
(Source: ACE MF)
 

Kotak Small Cap Fund has exposure of 7.3% to AI stocks. Its highest exposure is in Cyient, a company that leverages AI and other cutting-edge technologies to enhance its service offerings and improve operational efficiency in sectors such as aerospace, defence, communications, and utilities. It also holds allocation to Persistent Systems, a company known for its cutting-edge cloud-native application development, analytics and AI, cloud engineering, migrations and managed services. Cyient has been awarded and highly recognised for its analysis and AI capabilities. In addition, the fund has exposure to Bosch, a leading supplier of technology and services in mobility solutions, industrial technology, consumer goods, and energy and building technology, along with small exposure to Happiest Minds Technologies.

#4: Motilal Oswal Midcap Fund

Launched in February 2014, Motilal Oswal Midcap Fund aims to invest in quality midcap companies having long-term competitive advantages and growth potential. The fund's investment strategy is to create a concentrated, high-conviction portfolio with a low churn and a buy-and-hold approach to investing.

As of May 31, 2023, Motilal Oswal Midcap Fund held 68.3% of its assets in mid cap stocks, 13.7% in large caps, 6.7% in small caps, and the balance in cash and equivalents.

In terms of AI stocks, Motilal Oswal Midcap Fund has an allocation of 6.8% to Persistent Systems. The fund also has exposure to a few other tech companies such as Coforge, KPIT Technologies, and Mphasis that specialise in AI-driven solutions. These stocks form around 15% of the fund's assets.

#5: SBI Focused Equity Fund

Launched in October 2004, SBI Focused Equity Fund is the largest scheme in the Focused Fund category having an AUM of Rs 28,666 crore. Being a Focused Fund, SBI Focused Equity Fund invests in a compact portfolio of a maximum of 30 stocks across market caps and sectors.

As of May 31, 2023, SBI Focused Equity Fund invested 52.9% in large caps, 27.5% in mid caps, 2.2% in small caps, 7.1% in overseas equities, 3% in Rights, and the balance in cash and debt.

SBI Focused Equity Fund has invested 7.1% in Alphabet Inc., a global tech giant (parent company of Google) which has been leading the AI race. The stock has been part of the scheme's portfolio for over four years now.

Outlook of Artificial Intelligence (AI) on businesses:

The adoption of AI in businesses has surged considerably over the past few years. AI will continue to play a crucial role in every industry due to its learning, analysing, logic, and reasoning capabilities that were once thought to be exclusively human qualities. It is expected that businesses deploying AI will benefit from improved customer relationships, better productivity, enhanced cost savings, and reduced risk of errors. That said, the fear of job cuts due to the advent of AI remains a concern.

To conclude...

AI has revolutionised the way individuals and businesses operate. Technology is an enabler offering numerous opportunities to the world to supplement and complement human intelligence and enhance the work and lives of people. India too stands to benefit from the immense potential that AI has to offer.

Do note AI is still in the developing stage and will undergo various changes in the coming years. Therefore, it could be a while before the theme fully plays out and reaches the masses. Furthermore, as the technology evolves, it is highly possible that those leading the AI race are replaced by new winners.

Due to their active investment strategy, mutual funds will be well placed to capitalise on the potential of Artificial Intelligence in improving business efficiencies.

 

DIVYA GROVER is the co-editor for FundSelect, the flagship research service of PersonalFN. She is also the co-editor of DebtSelect. Divya is an avid reader which helps her in analysing industry trends and producing insightful articles for PersonalFN’s popular newsletter – Daily Wealth letter, read by over 1.5 lakh subscribers.

Divya joined PersonalFN in 2019 and has since then used stringent quantitative and qualitative parameters to analyse funds to provide honest and unbiased research to investors. She endeavours to enable investors to make an informed investment decision and thereby safeguard their wealth.


Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing.

Disclaimer: This article is for information purposes only and is not meant to influence your investment decisions. It should not be treated as a mutual fund recommendation or advice to make an investment decision.



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