Why is India’s largest mutual fund betting on TCS and Infosys despite the massive stock crash?

Retail investors are retreating from the IT sector, but the Parag Parikh Flexicap Fund—managing over Rs 1.1 lakh crore—is aggressively increasing its stake in the industry’s stalwarts. In June alone, the fund snapped up 54 lakh shares of Infosys, 31.15 lakh shares of HCL Technologies, and 18.26 lakh shares of TCS. This move signifies a massive contrarian bet, ignoring the short-term sentiment that has battered these stocks throughout the year.

The market has been unforgiving to the IT sector, which is currently enduring some of its deepest valuation slumps on record. TCS has plummeted 55% from its 2024 peak, while Infosys and HCL Technologies have logged declines of 47% and 43% from their respective highs. Investors are fleeing, fearful that the rapid adoption of AI will disrupt traditional business models and crush margins, yet this mutual fund is treating the sell-off as a long-term entry point.

The fund’s leadership is looking past the current hype cycle, emphasizing that these firms generate reliable cash flows today, unlike speculative tech plays. While there is genuine concern that AI-driven automation could lead to revenue deflation, the fund manager maintains that the core work—delivering and maintaining functional code—remains essential. As long as these companies continue to earn in dollars and maintain net-cash balance sheets, the fund believes the long-term potential outweighs the current noise.

The sector’s future now hinges on a fundamental business model reset over the next 24 to 36 months. Analysts are no longer focused solely on valuation multiples; the spotlight is squarely on earnings visibility and the capacity of these incumbents to commercialize AI-native delivery models. For shareholders, the key will be watching if these firms can execute on M&A strategies and capture new AI-driven spending before their core legacy revenue streams erode further.