Thinking of Investing in Tata Digital Fund? Read This First

India's digital economy has become a meaningful growth engine, not just a buzzword.

For starters, the digital economy refers to economic activity that is enabled by digital technologies, including the internet, mobile connectivity, cloud computing, artificial intelligence, data analytics, digital payments, e-commerce platforms, and software services.

In FY23, digital activities contributed 11.7% of GDP and this share is expected to rise above 13% by FY25 and to nearly 20% by FY30, according to the Press Information Bureau.

Over the past decade, digital-enabling industries have grown at 17.3%, materially higher than the 11.8% growth rate of the overall economy.

Moreover, the sector is projected to continue growing at around 30% over the next few years. A report by Bessemer Venture Partners estimates that the digital economy will cross the US$ 1 tn mark by 2030.

This growth is expected to be driven by an expanding internet ecosystem, with nearly one billion users online, making India the third-largest digitised economy globally.

The Tata Digital Fund seeks to participate in this expanding opportunity.

This editorial examines the scheme investment approach, portfolio positioning, and how it aligns with India's changing digital environment.

About Tata Digital Fund

Tata Digital India Fund is an open-ended equity scheme (Sectoral Fund) that invests in the Information Technology (IT) sector.

The primary objective of the scheme is to seek long-term capital appreciation by investing at least 80% of its net assets in equity and equity-related instruments of IT companies in India. The remaining up to 20% may be invested in equity, debt, or money market instruments.

The fund has the flexibility to allocate up to 20% of its average assets in overseas securities and overseas Exchange Traded Funds, allowing it to capture global tech opportunities.

Also, to enhance portfolio returns, the fund can lend its securities to SEBI-approved intermediaries.

It can allocate 20% to 25% of net assets to stock lending, charging a negotiated fee while maintaining collateral that is always higher than the security's value.

The scheme permits the use of derivatives up to 50% of net assets for non-hedging purposes.

Investment Approach

The fund managers follow a 'Growth at Reasonable Price' investment style.

The strategy focuses on structural stories, targeting companies with strong balance sheets, the ability to invest in emerging technologies, and long-term growth potential. The fund benefits from the digital transformation of India, rising IT spending, and the outsourcing of IT services.

The scheme carries a 'Very High' riskometer rating, reflecting its sectoral concentration in IT.

The Tata Digital Fund states that it's best suited for investors with a high risk appetite and a long-term investment horizon. Given its sectoral mandate, the fund offers limited diversification compared to broad-based equity schemes.

Fund Manager Experience

A fund's performance is closely tied to its fund managers and their experience.

Meeta Shetty: She is the Primary/Lead Fund Manager for the scheme. She is an Economics graduate, a CFA charter holder, and has pursued the management program of IIM Ahmedabad.

She has 18 years of industry experience. Previous work experience include Kotak Securities, HDFC Securities, and Asian Market Securities. She has been managing the fund since 9 March 2021.

Hasmukh Devji Vishariya: He serves as a Fund Manager and Research Analyst. He has 7 years of industry experience and has been managing the fund since 1 March 2025, overseeing the overseas investment.

Vishariya had a 7-year stint at Star Union Dai-ichi Life Insurance covering IT, and FMCG & Consumer Discretionary. He is a Chartered Accountant and has CFA Level 1.

Portfolio Positioning

As of 15 February 2026, the fund's Asset Under Management was just Rs 107.11 bn. The direct plan expense ratio is 0.51% per annum.

Equity allocation is 91.81%, followed by cash and cash equivalents (8.18%).

True to its label, the portfolio is concentrated, with the IT accounting for 80.40%, followed by Industrials (4.46%), Financials (4.03%), Consumer Discretionary (2.82%), and Consumer Staples (0.11%).

The fund holds a concentrated portfolio of 41 stocks, with the top 10 stocks accounting for 69.32%.

This concentrated approach allows the fund to take high-conviction bets, with significant allocations heavily weighted toward its top 5 stock holdings. The top five holdings represent 51.88%, reflecting high-conviction positioning.

The fund is dominated by Large Cap stocks (66.16%), which provide stability and represent the stalwarts of the IT industry. Holdings include Infosys (18.41%), TCS (11.75%), Tech Mahindra (10.33%), Wipro (6.47%), and HCL Technologies (4.92%).

However, it maintains significant strategic allocations to Midcaps (14.95%) and Smallcaps (18.88%) to capture higher alpha and aggressive growth.

The fund's investments span various fintech and internet platforms, including Eternal (4.42%), Cartrade (1.24%), Affle (0.77%), and Netweb (0.7%), as well as in companies such as Meeso and Physicswallah.

As of 20 February 2026, the scheme's price-to-earnings (PE) multiple is 30.16, a premium to the Nifty IT (22.7). The portfolio turnover ratio is low at around 0.19, indicating a buy-and-hold strategy.

Risk & Return

Based on historical data, the fund has outperformed its benchmark across several time horizons. It has delivered an annualised return of 18.59% since inception in December 2015.

The fund's performance surpassed its benchmarks during this time, delivering a return higher than both the Nifty IT Total Return Index (TRI) at 15.15% and the Nifty 50 TRI at 13.57%.

Source: Tata Digital Fund

The outperformance comes with lower volatility. It has maintained a standard deviation of 16.79, lower than the benchmark (19.67). This means the fund's returns are less volatile than the benchmark.

Lower volatility is also supported by a portfolio beta of 0.78, indicating it has historically been less reactive to broader market swings than the index.

It also ranks higher in risk-adjusted return, with a Sharpe ratio of 0.54, compared to the benchmark's 0.34. A higher Sharpe ratio indicates that a fund has earned a higher return per unit of risk taken.

The fund's reduced volatility is instrumental in effectively managing downside risk.

Its Sortino ratio of 0.85, which surpasses the benchmark, indicates superior downside risk management by rewarding the fund for successfully limiting losses during periods of market turbulence.

Bottomline

Tata Digital India Fund offers concentrated exposure to India's IT-led digital theme, backed by a defined mandate and a growth-oriented investment approach.

Its portfolio reflects high conviction, with meaningful allocation to large-cap IT names alongside selective mid and small-cap exposure.

Historical performance has outpaced benchmarks, supported by relatively lower volatility.

However, the sectoral nature of the scheme and valuation premium require investors to recognise the cyclical and concentrated risks inherent in technology-focused funds.

Disclaimer: This write-up is for information purposes and does not constitute any kind of investment advice or a recommendation to Buy / Hold / Sell a fund. Returns mentioned herein are in no way a guarantee or promise of future returns. As an investor, you need to pick the right fund to meet your financial goals. If you are not sure about your risk appetite, do consult your investment consultant/advisor. Mutual Fund Investments are subject to market risks. Read all scheme-related documents carefully. Registration granted by SEBI, Membership of BASL, and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors.