Parag Parikh Fund Increases TCS, Infosys, HCL Tech Stakes Despite IT Crash

India's largest mutual fund scheme, Parag Parikh Flexi Cap Fund, increased its exposure to TCS, Infosys and HCL Technologies in June, even as the country's biggest information technology (IT) companies continued to lose market value amid concerns over artificial intelligence (AI) and slowing earnings growth.

According to the fund's monthly portfolio statement, the scheme, which manages assets of more than ₹1.1 lakh crore, added shares across all three companies during the month.

The fund purchased 54 lakh additional shares of Infosys, taking its holding to 4.27 crore shares from 3.73 crore in May. It also bought 31.15 lakh shares of HCL Technologies, increasing its stake to 4.61 crore shares. In TCS, the fund acquired another 18.26 lakh shares, taking its holding to 1.77 crore shares.

IT Stocks Among Biggest Wealth Destroyers

The buying comes at a time when IT stocks have been among the worst-performing large-cap counters this year. Note that:

• TCS has fallen 55% from its record high of ₹4,592.25 touched on 30 August 2024, and is down 36% year-to-date (YTD).

• Infosys limited stock has declined 47% from its all-time high of ₹2,006.45 recorded on 13 December 2024. It is down 34% in 2026.

• HCL Technologies stock has slipped 43% from its lifetime high of ₹2,012.20 hit on 13 January 2025. It is down 30% YTD.

AI Debate Continues To Divide Views

The fund house's investment approach remains centred on cash generation rather than uncertainty around AI.

Its chief investment officer has indicated in a recent interview that the long-term impact of AI on the IT services industry remains unclear. The preference, according to the executive, is for businesses generating strong cash flows today rather than relying on earnings expected far into the future.

The executive also noted that Indian IT companies continue to benefit from dollar revenues, while wage inflation is likely to remain moderate. AI may change how software is developed and maintained, but demand for those services is expected to continue.

The broader debate across the sector remains divided. While automation may reduce revenue from some existing contracts, companies are also seeing AI create new technology spending opportunities.

Brokerages See Transition Ahead

Brokerages estimate that nearly 15-20% of IT services revenue could face pressure from AI-led automation. At the same time, they caution against assuming a uniform impact across the industry, saying the transition is likely to vary by company.

They expect the sector to undergo a business model shift over the next 24-36 months, with AI capabilities and strategic acquisitions likely to play a bigger role in determining market share.

Attractive Valuations Yet Earnings Remain Key

The correction has pushed dividend yields higher across the sector. Among the five largest IT companies, Wipro offers a dividend yield of 5.7%, followed by HCL Technologies at 5.6%, TCS at 4.9%, Infosys at 4.7% and Tech Mahindra at 3.6%.

Data shared by DSP Mutual Fund shows the four largest IT companies now trade at a 36% discount to their 10-year average price-to-earnings multiple while generating a free cash flow yield of around 6.7% and a shareholder yield of 5.7%, supported by net cash balance sheets.

However, its market strategist said lower valuations alone are unlikely to mark the bottom unless earnings visibility improves. The strategist added that investors still lack clarity on the pace of earnings growth, although the challenge appears less severe for mid-cap IT companies.

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