Tata Digital India Fund: A Good Fund to Ride the Tech and AI Wave?

Technology today is playing the role of an enabler, making it convenient to perform several tasks - be it banking, transferring money to someone using UPI, shopping, ordering food or groceries, booking a cab, and much more.

This has been possible due to the integration of telecom with technology, where data is the new oil.

Since the launch of the Digital India programme, various companies, irrespective of their size and scale, have adopted technology in their internal operations as well as in their customer and supply-chain interactions.

Artificial intelligence, too, is playing a pivotal role across industries today - be it automobiles, transportation & logistics, healthcare, education, retail/e-ecommerce, manufacturing, agriculture, energy, finance, law, cybersecurity, media & entertainment, etc.

Numerous complex tasks are now automated, enhancing operational efficiency and, in turn, productivity.

In short, we are living in an indispensable digital ecosystem. It appears that the future of Digital India is poised for remarkable advancements, leveraging emerging technologies to further drive innovation and growth.

This is expected to strengthen India's position as a global leader in the digital economy and redefine the socio-economic landscape.

In such times, if you are looking at riding this wave of technology and AI boom, you may look at some of the digital India mutual funds in India.

In this editorial, we will walk you through the Tata Digital India Fund.

Fund Overview

Launched a decade back in December 2015, Tata Digital India Fund is among the oldest funds and the second largest in the technology and digital India category, managing assets over Rs 117 billion (bn) as of October 2025.

The investment objective of the fund is to provide long-term capital appreciation by investing predominantly in equity/equity-related instruments of the companies in the Information Technology (IT) sector in India.

However, there is no assurance or guarantee that the investment objective of the fund will be achieved. The scheme does not assure or guarantee any returns.

The fund seeks to achieve its investment objective by investing at least 80% of its net assets in equity/equity-related instruments of companies in the IT sector in India or overseas.

The indicative list of businesses which are part of the IT sector is as follows:

• IT services, consulting and outsourcing companies
• IT hardware and/or software companies
• IT infrastructure providers like data centres, leased line providers, etc.
• Fin tech companies
• Internet technology enabled services, including e-commerce, technology platforms, IoT (Internet of Things), and other online services.
• Digital service providers
• Data and data solutions providers

The fund also invests up to 20% of its assets in other equity and equity-related instruments and debt & money market instruments.

The fund is co-managed by Meena Shetty (since November 2018) and Hasmukh Vishariya (since March 2025). Before them, several other fund managers have handled this fund.

Tata Digital India Fund - Snapshot

Inception Date	28-Dec-15	SI Return (CAGR)	19.28%
Corpus (bn)	Rs 177.94	Min. Lumpsum | SIP	Rs 5,000 | Rs 100
Expense Ratio (Dir/Reg)	0.44% / 1.68%	Exit Load	0.25%

Source: ACE MF

What is the Investment Strategy of Tata Digital India Fund?

To achieve the investment objective, by investing in at least 80% of its net assets in equities of companies in the IT sector in India or overseas, rigorous fundamental research will be conducted.

This includes parameters such as management competitiveness, business competitiveness, corporate governance, growth prospects, past track record, etc.

As regards the portfolio positioning and construction, the fund endeavours to invest where it sees...

• Growth at a reasonable price (GARP)
• Long-term growth potential
• Companies with strong balance sheets and the ability to invest in emerging technologies (structural growth stories)

With due consideration to these, the fund usually seeks to have significant allocations to the top 5 stocks in the portfolio.

In other words, the fund management team follows a bottom-up approach to stock selection.

Besides, the fund trades in derivative instruments to hedge the risk of fluctuations in the value of the investment portfolio.

In the case of non-hedging, the fund has a restrictive mandate of not investing more than 50% of its net assets in derivative instruments.

What is the Portfolio of Tata Digital India Fund?

As per the October 2025 portfolio, the fund has 97.5% of its net assets in equity and equity-related assets of technology and allied companies. The remaining 2.5% are in cash and cash-equivalent assets.

The fund typically holds a reasonably diversified portfolio of 35-40 stocks. As per the October 2025 portfolio, the fund has 36 stocks, of which 66% are largecaps, 18% smallcaps, and 14% midcaps.

The top 10 stocks comprise 72.9% of the portfolio, and include names such as Infosys (18.4%), TCS (11.2%), Tech Mahindra (8.6%), etc.

Within the digital India theme, the fund has exposure to sectors such as IT, retailing, telecom, auto & ancillaries, hospitality, etc.

The fund has a dominant exposure of 92.8% of its assets to IT (82.1%), retail (7.3%), and telecom (3.5%).

The fund approaches the digital India theme with a long-term view and refrains from churning the portfolio. The portfolio turnover ratio of the fund has ranged between as low as 9-22% in the last one year.

What Are the Historical Returns of the Tata Digital India Fund?

Since its inception, the fund has clocked a compounded average growth rate (CAGR) of 19.3% (under the Direct Plan).

Over the last 3 years and 5 years, ever since the focus on the digitisation and the use of technology in various sectors, the fund has delivered a compounded annualised return of 13.9% and 26.7%, respectively, as of 6 December 2025.

Over 3 years, the fund has lagged behind its category peers. This is largely because of higher weightage to Infosys, which hasn't moved in the last 3 years.

Over a 5-year and 7-year period, the fund has performed a tad better than the category average and its benchmark, i.e. the Nifty IT - TRI.

Tata Digital India Fund - Performance

Scheme Name	Absolute (%)	CAGR (%)			Risk Ratios
	1 Year	3 Years	5 Years	7 Years	SD Annualised	Sharpe	Sortino
Tata Digital India Fund	6.11	13.91	26.67	21.71	17.89	0.18	0.38
Category Average*	6.91	15.23	25.96	21.2	18.25	0.18	0.37
Nifty IT - TRI	3.14	8.84	20.42	17.9	20.31	0.11	0.21

Source: ACE MF

What About the Risk Profile of Tata Digital India Fund?

Being a sector fund investing predominantly in the IT companies in India and overseas, the fund is classified as very-high risk.

The fund has exposed its investors to high risk (standard deviation of 17.89) compared to its category average and benchmark (as of 6 December 2025). In words, the volatility registered by the fund is on the higher side.

That said, in terms of the risk-adjusted returns, the Tata Digital India Fund has justified it when gauged on the sharpe ratio (of 0.18) and the sortino ratio (of 0.38).

In fact, on the sortino ratio - which captures the downside risk while speaking about risk-adjusted returns - the fund has fared slightly better than its peers.

Should You Add Tata Digital India Fund to Your Watchlist?

If you have the stomach for very high risk, want to have exposure to technology stocks, ride the AI wave and want to benefit from the long-term growth story of the digital India theme, then the Tata Digital India Fund is one of the options for a long-term horizon (7-8 years or more).

The Indian IT industry is continuously adapting to new trends and challenges. It remains a powerhouse of innovation and growth.

That being said, keep in mind that the fund's performance would be closely linked to how the IT and digital India theme actually plays out over the long-term. While these can be cyclical or defensive, much depends on the global economic conditions and geopolitical shifts going forward.

Hence, tread carefully rather than getting carried away. Invest in congruence with your risk profile, investment objective, time horizon, and the asset allocation best suited for you.

Be a thoughtful investor.

Happy investing.

#Table Note: Data as of 6 December 2025
Rolling period returns are calculated using the Direct Plan-Growth option. Returns over 1 year are compounded annualised.
Standard Deviation indicates total risk, while the Sharpe Ratio and Sortino Ratio measure the Risk-Adjusted Return. They are calculated over 3 years, assuming a risk-free rate of 6% p.a.
*All Digital India Mutual Funds and Technology Funds are considered to compute the category average returns.
Please note that this table represents past performance. Past performance is not an indicator of future returns.
The securities quoted are for illustration only and are not recommendatory.
Speak to your investment advisor for further assistance before investing.
Mutual Fund investments are subject to market risks. Read all scheme-related documents carefully.

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 consultant/advisor. Mutual Fund Investments are subject to market risks, read all scheme-related documents carefully. Registration granted by SEBI, enlistment as IA with Exchange and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors.