Why Parag Parikh Flexi Cap Fund Is Buying IT Stocks While Everyone Else Is Selling

In the three months to May 2026, foreign investors pulled out close to $30 billion from Indian stocks. The Nifty IT index slid toward its worst year since 2008, down more than 27% in 2026. Brokerages turned cautious, "sell on rise" notes did the rounds, and IT counters were among the most avoided trades on Dalal Street.

During those same three months, India's largest actively managed equity fund was quietly doing the opposite, buying IT.

PPFAS Mutual Fund's Parag Parikh Flexi Cap Fund, which manages around ₹1.41 lakh crore (about $14.9 billion), added to its IT services holdings over the period, even as the rest of the market treated the sector as a value trap. The buying was deliberate, and the man behind it has a specific reason.

What's Driving the Bet

1. The valuations finally got cheap enough to act.

For a fund that openly waits for prices to fall before deploying, the IT correction was an invitation rather than a warning. The Nifty IT index now trades at about 15.7 times estimated 2026 earnings, down sharply from 21.2 times a year earlier. The fund's own portfolio P/E sits at 16.39, against a flexi-cap category average of 26.36, a reminder of how valuation-conscious the buying has been.

To fund the purchases, PPFAS drew down the cash it had been sitting on. Debt and money-market holdings fell to 14.03% in May, down from a peak of 23.77% in April 2025 (which itself had doubled from 11.85% a month earlier, when valuations looked stretched). Core equity allocation rose to roughly 70% in May, from 67.30% a year ago.

 In plain terms: money that was parked on the sidelines went back to work, and some of it went into IT.

2. Rajeev Thakkar thinks the AI panic is overdone.

The entire IT sell-off rests on one fear: that artificial intelligence will let companies build software in-house, gut the outsourcing model, and shrink the work Indian IT firms are paid to do. PPFAS's Chief Investment Officer for equities, Rajeev Thakkar, doesn't buy the extreme version of that story.

In a June 11 interview, he argued that the idea of every company bringing all work in-house, or AI models doing everything end-to-end with no humans involved, isn't realistic. His counter-view: while AI may automate some software-development tasks, IT services firms also stand to gain from the same productivity and cost savings, and they get to keep part of those gains for themselves.

3. The earnings haven't actually broken, only the sentiment has.

This is the part the headline price action hides. The sell-off has been driven by fear, not by collapsing numbers. Global brokerage CLSA, after speaking with TCS, Infosys, HCL and Wipro ahead of results, found no evidence of AI-led pricing pressure in fourth-quarter deal renewals. HCL Technologies, which reported in April, posted a 4.2% rise in net profit to ₹4,488 crore and 12.34% revenue growth year-on-year, then declared an interim dividend, hardly the move of a business bracing for collapse.

The fund now has nearly 19% in the technology sector, with HCL Technologies and Infosys among its top 10 holdings.

The Contrarian Picture at a Glance

Fund returns (annualised, as per INDmoney, NAV as of June 24, 2026): 1-year −2.09%, 3-year 15.32%, 5-year 15.10%. INDmoney ranks the fund 3rd of 24 in the flexi-cap category.

Things to Keep in Mind

• The fund is underperforming right now, and that's the point of contrarian investing. It's down around 0.8% to 3.25% over the past year, depending on the plan and date, with a negative alpha of −1.35. Buying what's hated means living through a stretch where it stays hated.
• Cheap can get cheaper. A 15.7x valuation is lower than it was, but the IT index already fell more than 27% this year and touched a 30-month low in February. "Cheaper than last year" is not the same as "the bottom."
• The Accenture warning is real, not noise. On June 19, Accenture cut its FY26 revenue growth guidance and flagged that client budgets aren't growing, AI spending is being reallocated from existing IT budgets, not added on top. Its outsourcing bookings fell 15% year-on-year. That's a genuine demand signal worth watching.
• One fund's conviction is not your research. PPFAS has a 10-year record (ranked second in its category over the decade by AMFI) and a stated philosophy of buying when others are fearful. That earns attention, not blind imitation. Its time horizon, a minimum of five years, may be longer than yours.
• The macro backdrop is still heavy. With FPIs having pulled close to $30 billion from Indian equities this year and foreign ownership near multi-year lows, sentiment can stay weak even when fundamentals hold.

The Bottom Line

India's biggest equity fund is betting that the market has confused a sentiment problem for a business problem in IT. The earnings so far back the fund's read more than the price action does, but contrarian bets are judged over years, not weeks, and the demand warnings are real enough that this one is far from settled.