--- title: "India's Nifty IT Index Down 28% YTD, Worst in 16 Years, Yet Largest Fund Is Buying the Dip" type: "News" locale: "en" url: "https://longbridge.com/en/news/290533371.md" description: "India's Nifty IT Index has fallen 28% year-to-date, marking its worst performance in 16 years, primarily driven by concerns over AI disrupting traditional outsourcing and Accenture's earnings warning. However, PPFAS's largest actively managed fund is bucking the trend by increasing its positions, believing the market is overly pessimistic. The fund argues that AI will enhance productivity for IT service providers rather than completely replacing human labor, and current valuations have reached historic lows" datetime: "2026-06-23T08:29:55.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/290533371.md) - [en](https://longbridge.com/en/news/290533371.md) - [zh-HK](https://longbridge.com/zh-HK/news/290533371.md) --- # India's Nifty IT Index Down 28% YTD, Worst in 16 Years, Yet Largest Fund Is Buying the Dip Indian tech stocks are experiencing their worst annual decline since 2008, yet the country's largest actively managed equity fund is choosing to buy against the trend. According to a Bloomberg report on Tuesday, the $14.9 billion Flexi Cap Fund under PPFAS Mutual Fund has been continuously increasing its holdings in Indian IT service stocks over the past three months, betting that market concerns about the impact of artificial intelligence on the traditional IT outsourcing industry are overly pessimistic. Rajeev Thakkar, Chief Investment Officer of Equity Investments at the fund, stated in an interview on June 11, **"The pessimistic narrative that all jobs will be brought in-house, that no one will outsource anymore, or that models are so efficient that no human intervention is needed, is unrealistic in my view."** This contrarian move comes against the backdrop of a significant compression in valuations for India's IT sector. The NSE Nifty IT Index has fallen approximately 28% year-to-date, with concerns that AI will erode demand for traditional outsourcing continuing to weigh on the sector's performance. Accenture's recent weak earnings warning further triggered a new round of selling. ## Worst Decline in 16 Years, Valuations Fall to Historic Lows The Nifty IT Index's decline this year puts it on track for its worst annual performance since 2008, with constituents including Indian IT giants such as Tata Consultancy Services and Infosys. **In terms of valuation, the index's forward P/E ratio for 2026 has compressed significantly from 21.2x a year ago to 15.7x.** Investors' core concern is that as AI technology accelerates its penetration into software development processes, the demand space for traditional IT outsourcing will be systematically compressed. Accenture's recently issued pessimistic earnings guidance further exacerbated deteriorating market sentiment, causing a sharp drop in the sector on Friday, before it stabilized somewhat on Monday. ## Contrarian Logic: AI Could Be a Productivity Bonus for IT Service Providers Thakkar's optimistic judgment on the IT services industry runs counter to current mainstream market sentiment. **He believes that while AI may automate certain software development tasks, it can also bring productivity improvements and cost savings to IT service firms, part of which can be retained by the companies themselves.** In his view, the market has become overly pessimistic. "We invest in companies that generate cash flow now and have tangible value," Thakkar said. "As long as valuations are reasonable and prospects are decent, we will step in." Currently, about 19% of the fund's portfolio is allocated to the technology sector, with HCL Technologies and Infosys among the top ten core holdings. Of this 19%, roughly half is invested in IT service stocks, while the rest is allocated to overseas tech companies such as Alphabet and Amazon. ## Shifting from Cash to Equities, Adding Positions Beyond IT This round of position-building is not limited to the technology sector. According to Thakkar, the fund also increased its holdings in stocks from the financial, utilities, and coal mining sectors during the same period, funded by cash reserves previously held in bonds and money market instruments. The fund's latest monthly report shows that as of May, the allocation to bonds and money market instruments had dropped to 14.03%, down from a high of 23.77% in April last year. The core equity position ratio rose from 67.30% a year ago to approximately 70%. Thakkar had previously maintained a higher cash ratio due to elevated stock valuations. Now, as the market correction provides more attractive entry opportunities, the fund is gradually converting idle funds into equity exposure. Risk Warning and Disclaimer Investing involves risks; please proceed with caution. This article does not constitute personal investment advice, nor does it take into account the specific investment objectives, financial status, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article align with their specific circumstances. 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