India’s largest actively managed equity fund is betting against investor fears over artificial intelligence’s impact on the outsourcing industry as it snaps up the nation’s beaten-down IT stocks.

PPFAS Mutual Fund’s $14.9 billion Flexi Cap Fund has added exposure to IT services companies over the past three months to May as valuations cooled sharply. The fund has also been buying stocks in sectors including financials, utilities and coal mining while deploying cash that had previously been parked in debt and money-market instruments, according to Chief Investment Officer for equities Rajeev Thakkar.

“This whole pessimism that everything will be brought back in-house and no one will outsource any work, or these models will be so efficient that end-to-end everything will be done by the models and no humans will be required — I don’t see that pessimism as being realistic,” he said in an interview on June 11. 

Thakkar’s optimism on IT services runs against prevailing market sentiment. The NSE Nifty IT Index, which includes Tata Consultancy Services Ltd. and Infosys Ltd., is headed for its worst annual performance since 2008 as investors fret that AI may erode demand for traditional outsourcing work. The tech stocks stabilized Monday after Accenture Plc’s dour forecast sparked a selloff Friday. 

The index is down over 27 per cent this year, driving a sharp compression in valuations. The gauge trades at 15.7 times 2026 estimated price to earnings, down from 21.2 times a year ago.

Thakkar argues the market has become overly pessimistic. While AI may automate some software-development tasks, he believes IT services firms stand to benefit from productivity gains and cost savings, some of which can be retained by the companies themselves.

The fund has nearly 19 per cent allocated to the technology sector, with HCL Technologies Ltd. and Infosys among the top 10 bets, according to the latest factsheet.

Despite its recent underperformance relative to most flexi-cap peers, PPFAS’s flagship fund remains among the category’s top long-term performers, ranking second over the past decade, according to the Association of Mutual Funds in India. The fund is down about 0.8 per cent over the past year, but has returned nearly 17.8 per cent over the past decade.

The fund has reduced its allocation to debt and money-market instruments to 14.03 per cent as of May, according to the factsheet, after deploying cash through March, April and May. Debt holdings had doubled in April last year to 23.77 per cent from 11.85 per cent in March 2025. 

“Our mandate is to invest in equities,” Thakkar said. “Whenever valuations don’t look attractive enough to find opportunities, remaining money stays in debt and money-market instruments.”

About 70 per cent of the fund is in core equities as of May, compared with 67.30 per cent a year ago, the factsheet shows. The shift comes amid a difficult period for Indian equities. Foreign investors have withdrawn nearly $30 billion from Indian stocks as of June 18, according to official data. Indian stocks are on track to lag many Asian peers this year, in contrast to South Korea’s benchmark Kospi Index, which has surged about 116 per cent in 2026. 

“Wherever we are seeing reasonable valuations and reasonably good prospects, we are investing in those spaces,” said Thakkar. “We are sticking with cash-flow generating businesses, and businesses which have value here and now.”

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Published on June 23, 2026