Amid intensifying concerns over slowing growth at Indian IT services companies and fears of AI-led disruption, PPFAS Mutual Fund CIO Rajeev Thakkar urged investors to avoid overreacting to near-term weakness, saying the sector’s long track record of adapting to new technologies remains intact.
Speaking at the fund house’s annual unitholders’ meeting in Mumbai on Saturday, Thakkar said Indian IT firms have repeatedly survived supposed existential threats. “The AI promos have been saying I can take care of all these jobs for a while now. But I am not that pessimistic. We will see how this goes,” he said.
PPFAS Flexicap Fund, which manages Rs 1.25 lakh crore, has 15% exposure to Indian IT companies, compared with 9% in its benchmark Nifty 500 TRI.
Thakkar said investors often fixate on the most recent quarterly numbers, missing the long arc of the sector’s evolution. “Generally, people tend to look at a shorter-term growth rate because that's the most obvious and recent that they can track. But if you zoom out over 20 years, you have IT companies that have become really big today,” he said. Growth, he added, is naturally cyclical because client budgets across application development, cloud deployment, infrastructure management and other IT projects ebb and flow.
He pointed to significant diversification beyond the traditional banking and financial services base, with manufacturing, healthcare, cloud migration and legacy tech modernization now contributing meaningfully to revenue. “Manufacturing has picked up. Medical and healthcare have picked up. Cloud computing… that has picked up,” he said.
The CIO highlighted the group’s strong operating and free cash flows, which historically built large cash balances on balance sheets. That trend, he said, has shifted in recent years as companies return more capital to shareholders. “After their reinvestment, whatever money is left out, they are giving it to the shareholders. It is the nature of their business,” he added.
Thakkar said fears of technological shifts wiping out demand for Indian IT are not new — nor have they played out in the past. “SaaS was supposed to be the death of Indian IT… Cloud was supposed to be the death of Indian IT. But each cycle has been bigger than the previous one,” he said.
Even with the rapid rise of AI tools, Thakkar remains confident. Citing Google’s newly announced ‘Anti-Gravity’ tool for AI-assisted software development, he said the industry will still require large teams. “The AI promos have been saying I can take care of all these jobs… but I am not that pessimistic,” he reiterated.
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