PPFAS Flexicap Fund, managing Rs 1.34 lakh crore in assets, has made a bold contrarian bet by significantly increasing stakes in HCL Technologies, Infosys, and Tata Consultancy Services (TCS) even as artificial intelligence (AI) anxieties drove the Nifty IT index to its worst monthly plunge since the 2008 global financial crisis in February.
The fund’s February portfolio disclosed bold buying across India’s software giants at precisely the moment analysts were slashing price targets and bears fearing sector extinction. PPFAS added 4.3 million shares of HCL Tech, 4.2 million shares of Infosys, and 1.9 million shares of TCS as the sector recorded a brutal 20% monthly crash, its steepest fall in nearly two decades.
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Exodus vs accumulation
Foreign institutional investors staged a dramatic exodus in February, offloading IT shares in two waves: Rs 11,000 crore in the first fortnight, followed by another Rs 5,993 crore between February 15-28, according to NSDL data. The rout has made IT one of 2022’s worst-performing sectors, with mounting fears that AI could render traditional software services obsolete.
But PPFAS is positioning for a different outcome entirely. The fund’s portfolio statement for February 28, 2026, revealed it was a net buyer across 14 holdings while reducing only three positions and making two new additions, Indraprastha Gas (IGL) and Mahanagar Gas (MGL), while exiting Multi Commodity Exchange (MCX) of India.
The selling pressure comes amid increasingly dire warnings from global brokerages about the sector’s future.Jefferies analysts warn that AI “may structurally change IT business mix towards consulting/implementation while shrinking managed services. This would not only increase cyclicality but also require a change in talent/operating model thus adding risks.”
The brokerage downgraded multiple stocks, including Infosys, HCL Tech and Mphasis to Hold, and TCS, LTIMindtree and Hexaware to Underperform, slashing price targets by up to 33%. IT stocks still offer higher downside than upside, Jefferies said.
In the worst-case scenario, Jefferies warned that stocks could derate by another 30-65% with Wipro having the lowest and Coforge having the highest derating potential. Even under modest assumptions of growth cuts of 3% over FY26-36 and 1% lower terminal growth, PE multiples could still derate by 10-35% for large IT firms and up to 15% for mid-sized players.
Emkay Global also turned cautious, lowering earnings estimates for FY27/FY28 by 1%/2% respectively and slashing target multiples for IT services and BPO companies by approximately 20% and 32% respectively, “to capture conservative assumptions on required terminal growth.”
Contrarian voices ready to buy the fear in IT
Not all analysts are ready to write off the sector, however.
Nuvama maintained a contrarian stance, arguing that “the Indian IT Services industry will come out stronger from the Gen AI disruption—with a net increase in its TAM—just like the earlier disruptions.” The brokerage said it remains “positive on the sector from a medium to long-term view,” though acknowledging that “near-term volatility might persist.”
Nomura echoed this view, stating: “The current sell-off in IT services stocks appears to be a case of front-loading of pains—pricing-in extinction of old models before gains from new models emerge. Tech cycles in the past have expanded overall tech spending, and IT companies have been agile to adapt to the new waves.”
The Japanese brokerage added that the transition period is painful, but high free cash flow and dividend yields (~4-5%) will likely create a floor for stocks sooner than later.
Kotak Equities also maintained faith in the long term, noting: “We expect IT services to remain relevant in the long term and do not change our terminal growth assumptions.” However, the brokerage did increase its cost of equity assumption by 50-100 basis points to reflect higher disruption risks.
What PPFAS bought and sold
Beyond IT, PPFAS Flexicap increased positions across a range of sectors including banking (HDFC Bank by 1 million shares), automobiles (Maruti Suzuki), and pharmaceuticals (Cipla and Zydus Lifesciences). The fund also boosted stakes in Coal India, ITC, and Bajaj Holdings & Investment.
Notable reductions came in Dr. Reddy’s Laboratories, Balkrishna Industries, where the fund cut 1.28 million shares, and Power Grid Corporation of India, which saw a reduction of 2.25 million shares.
The fund made a massive exit from CMS Info System, slashing its holding by 4.9 million shares to just 199,758 shares, while completely exiting Multi Commodity Exchange of India.
Whether PPFAS’s contrarian IT bets prove prescient or premature will depend on how quickly India’s software giants can pivot from legacy services to AI-driven offerings and whether the market’s current pricing already reflects the worst-case scenarios that analysts are warning about.