PPFAS Mutual Fund CIO Rajeev Thakkar has defended the PPFAS investment strategy amid criticism of recent equity performance. His message was simple: weak relative returns are part of equity investing and do not automatically mean a long-term process has failed.
In an August 4 note, Thakkar addressed concerns about PPFAS schemes, especially the Parag Parikh Flexi Cap Fund. He called Indian equities broadly range-bound for roughly the past two years.
Why Recent Returns Have Looked Weak
PPFAS often buys companies or sectors that are out of favour. That can produce an uncomfortable gap between the fund and faster-moving benchmarks when popular stocks continue rising or undervalued holdings remain ignored.
“In such times, the relative returns will not look pretty,” Thakkar said. He added that such phases may last three months, one year or even longer, depending on when the market recognises the value the fund believes it has found.
Thakkar rejected claims that large assets caused the weakness. He recalled deeper underperformance in 2007, when his portfolio management service handled slightly more than ₹100 crore, arguing that today’s phase is not exceptional in scale.
The Numbers Behind The Current Position
| Measure | Figure Mentioned By Thakkar |
| Range-bound market period | About two years |
| Earlier PMS assets in 2007 | Slightly above ₹100 crore |
| Peak cash allocation | Around 25% |
| Current cash allocation | About 14%–15% |
| Possible future cash level | Single digits |
The lower cash position shows the fund is finding more stocks worth buying. Cash in the Parag Parikh Flexi Cap Fund has dropped from around 25% to roughly 14%–15% of portfolio assets.
This does not predict an immediate rally. Instead, the PPFAS investment strategy is changing gradually as valuations become more workable after time and price corrections.
Why Thakkar Sees Better Opportunities
Thakkar said the combination of nearly two years of time correction across the wider market and price correction in some segments was increasing the available opportunity set.
“The available opportunities are increasing, and the outlook for future returns here on appears to be improving,” he said, contrasting today’s position with PPFAS’s caution and higher cash during the market exuberance of 2024.
Thakkar said equity volatility helps explain why stocks may outperform fixed deposits over time. He warned against comparing variable market returns directly with predictable bank-deposit income over short holding periods.
Where PPFAS Is Finding Value
The fund house is not limiting its search to one fashionable narrative. Its present views include:
- Treating IT-services weakness as an opportunity, not an existential crisis.
- Expecting AI to remove some work but create demand elsewhere, including cybersecurity.
- Retaining four private-sector banks despite concerns about HDFC Bank.
- Avoiding investments based only on currently fashionable market themes.
PPFAS has no holding in pure-play model companies such as OpenAI or Anthropic. Its hyperscaler investments combine established businesses with artificial-intelligence operations, reducing dependence on model-development economics.
On private banks, Thakkar said the PPFAS investment strategy had not changed. Based on information reported so far, he does not believe HDFC Bank’s difficulties materially threaten its franchise or customer base.
What Investors Should Understand
Thakkar’s defence is not a promise of recovery. It explains why a value-oriented portfolio can trail when unfashionable holdings take time to gain recognition.
- Asset size alone does not explain every period of underperformance.
- Cash falls when managers identify investments at acceptable prices.
- Relative returns may remain weak before contrarian positions work.
What To Expect Next
Cash in the Parag Parikh Flexi Cap Fund will be the clearest indicator. Single digits would indicate greater deployment. Portfolio disclosures should reveal whether they add to IT services, private lenders or other areas.
The PPFAS investment strategy remains deliberately selective, so deployment may be uneven rather than rapid. Thakkar’s comments indicate greater optimism, but markets can stay range-bound longer than expected.
The final test is execution. If purchases deliver while risk stays controlled, lower cash may aid future returns. If markets weaken, patience will again become central to the PPFAS investment strategy.
