AI-based models such as ChatGPT can carry out mental processes like judgment, problem-solving, perception, and human communication in various languages. Think creating content, solving math problems, explaining complex topics, etc. It can also and translate.
Artificial Intelligence (AI) is slowly transforming our lives – the way we shop, manage our schedules, entertain ourselves, get customer support, and carry out many other tasks.
AI is also enhancing outcomes in key sectors such as healthcare, education, agriculture, automobile, and finance by automating routine tasks. It uses predictive analytics for making better decisions.
AI will become more sophisticated with time. With the betterment of machine learning and improving computing power, the possibilities of what AI can do is endless!
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.
As an investor, If you too wish to ride the booming technology wave, equity mutual funds can be your best bet.
In this article, we will look at some diversified equity mutual funds with 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 April 30, 2023, Parag Parikh Flexi Cap Fund allocated 56.6% of its assets in largecaps, about 4% in midcaps, 7.2% in smallcaps, 17.2% in overseas equities, and the balance in cash and debt.
Top AI Stock Holdings of Parag Parikh Flexi Cap Fund
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Parga Parikh Flexi Cap Fund holds exposure to foreign entities such as Microsoft Corp, Alphabet Inc, Amazon.com, and Meta Platforms. These have been at the forefront of various tech innovations, including AI. These stocks collectively account for 17.2% of its assets as of 30 April 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. It also plus diversifies the portfolio with offshore equities.
As of 30 April 2023, Axis Growth Opportunities Fund holds 38.8% of its assets in largecaps, 36% in midcaps, 4.1% in smallcaps, about 17.6% in overseas equities/ ADRs & GDRs, and the balance in cash and equivalents.
Top AI Stock Holdings of Axis Growth Opportunities Fund
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Axis Growth Opportunities Fund holds a mix of domestic and foreign AI stocks.
Tata Elxsi, a medium-sized IT firm is well-known for its design and engineering capabilities. It has the highest allocation followed by Microsoft Corp, Persistent Systems, and Alphabet Inc. These AI stocks collectively form 8.9% 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.
Launched as a Mid Cap Fund in February 2005, Kotak Small Cap Fund holds a smallcap biased portfolio along with significant exposure to midcaps.
As of 30 April 2023, Kotak Small Cap Fund has an allocation of about 67% in smallcaps, 22.6% in midcaps, 5.3% in largecaps, and the balance in cash.
Top AI Stock Holdings of Kotak Small Cap Fund
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Kotak Small Cap Fund has exposure of 7.4% 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. Cyient has been awarded and highly recognised for its analysis and AI capabilities.
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.
The fund also 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 30 April 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 6.5% 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 10% 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 27,962 crore.
Being a Focused Fund, SBI Focused Equity Fund invests in a compact portfolio of a maximum of 30 stocks across marketcaps and sectors.
As of 30 April 2023, SBI Focused Equity Fund invested 52.9% in largecaps, 27.5% in midcaps, 2.2% in smallcaps, 7.1% in overseas equities, 3% in rights, and the balance in cash and debt.
SBI Focused Equity Fund has invested 6.3% 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.
Businesses deploying AI benefit from improved customer relationships, better productivity, enhanced cost savings, and reduced risk of errors.
However, the fear of job cuts due AI remains a concern.
Takeaway
AI has revolutionised our lives and will continue to do so for many years.
This technology is an enabler. It offers many opportunities to complement human intelligence and enhance people’s lives. India stands to benefit from the immense potential that AI has to offer.
AI is still in its development stage. It will undergo various changes in the coming years. It could be a while before this theme fully plays out and reaches the masses.
And it’s likely that as the technology evolves, those leading the AI race are replaced by new winners.
Due to their active investment strategies, mutual funds are well placed to capitalise on the potential investment returns.
