$14.9 Billion Fund Surges into IT Amid AI Fears, Vows Counter-Bet Against Tech Downturn

$14.9 Billion Fund Surges into IT Amid AI Fears, Vows Counter-Bet Against Tech Downturn​

India’s largest actively managed equity fund is mounting a powerful contrarian bet against widespread investor fears regarding artificial intelligence (AI) and its potential impact on the outsourcing industry. PPFAS Mutual Fund’s $14.9 billion Flexi Cap Fund has significantly increased its exposure to technology services companies over the past three months as valuations across the sector have cooled sharply.

The fund is not solely focused on tech, however. Chief Investment Officer for equities, Rajeev Thakkar, revealed that PPFAS has also been deploying cash into financials, utilities, and coal mining stocks, strategically diversifying its portfolio beyond traditional IT services.

Contrarian Bet in Oversold Tech Sector​

Thakkar’s bullish perspective runs directly counter to prevailing market anxiety. The NSE Nifty IT Index is currently down over 27% this year, heading toward what is projected as its worst annual performance since 2008. This dramatic downturn has led to severe valuation compression for the sector.

The gauge now trades at 15.7 times the 2026 estimated price to earnings, a marked reduction from the 21.2 times valuation seen just one year ago. This suggests significant apprehension among investors regarding the future of traditional outsourcing work.

The State of India's IT Services Market​

While AI may automate certain software development tasks, Thakkar argues that pessimism about this transition is unrealistic. He believes that IT services firms are uniquely positioned to benefit from substantial productivity gains and cost savings resulting from technological shifts. These efficiencies can be retained by the companies themselves, strengthening their competitive position.

The fund currently holds nearly 19% of its allocation in the technology sector, featuring established players like HCL Technologies Ltd. and Infosys among its top 10 holdings. This move underlines the CIO’s confidence in the fundamental resilience of the IT outsourcing model.

Fund Allocation Shifts and Long-Term Outlook​

PPFAS's flagship fund has remained a strong performer across the long term, ranking second over the past decade according to the Association of Mutual Funds in India. While the fund is down about 0.8% over the last year, it has delivered returns nearing 17.8% over the entire decade.

In prioritizing portfolio health, the fund reduced its allocation to debt and money-market instruments to 14.03% as of May, having actively deployed cash through March, April, and May. This action underscores a commitment to equity investment opportunities whenever they present themselves.

The fund has committed approximately 70% of its assets to core equities as of May, an increase from the 67.30% held a year ago. This disciplined approach comes amid turbulent macro indicators for Indian equities. Foreign investors have reportedly withdrawn nearly $30 billion from Indian stocks as of June 18.

Thakkar maintains that the investment strategy is simple: focusing only on businesses that generate cash flow and possess real value right now, stating they are "sticking with cash-flow generating businesses" despite market volatility.