--- a/hgext/lfs/wrapper.py	Mon Jan 15 00:16:11 2018 +0530
+++ b/hgext/lfs/wrapper.py	Sat Jan 13 20:07:14 2018 -0500
@@ -130,7 +130,9 @@
         textlen -= offset
 
     lfstrack = self.opener.options['lfstrack']
-    if lfstrack(self.filename, textlen):
+
+    # Always exclude hg owned files
+    if not self.filename.startswith('.hg') and lfstrack(self.filename, textlen):
         flags |= revlog.REVIDX_EXTSTORED
 
     return orig(self, text, transaction, link, p1, p2, cachedelta=cachedelta,