PPFAS Flexi Cap Fund Underperformance: CIO Rajeev Thakkar Responds

Rajeev Thakkar, Chief Investment Officer-Equity and Director at PPFAS Mutual Fund, has addressed investor scrutiny regarding the recent underperformance of the Parag Parikh Flexi Cap Fund. Thakkar described the growing investor chatter as “noise on social media,” asserting that two years of range-bound equity markets represent a normal “feature and not a bug” of equity investing.

The Parag Parikh Flexi Cap Fund stands as India’s largest actively-managed equity scheme, having become the first active fund to surpass the Rs 1-trillion AUM mark in May 2025.

Key Fund Metrics and Market Outlook

• Fund’s peak cash levels: ~25%
• Current cash levels: 14-15%
• Expected cash level trajectory: Moving toward single-digit “in some time”
• Nifty 100 PE (as of August 4, Screener.in): 20.8
• Nifty Midcap 150 PE (as of August 4, Screener.in): 30.7
• Nifty Smallcap 250 PE (as of August 4, Screener.in): 34.6

On absolute returns, Thakkar noted the fund house had advised caution since the market exuberance of 2024, a stance that drew “mocked” responses for its rising cash levels at the time. He stated that the two years of time correction have now created more opportunities, suggesting the outlook for returns “appears to be improving.”

Regarding relative performance, Thakkar indicated the current period of underperformance is “not noteworthy” in either duration or magnitude, referencing a larger drawdown he managed in 2007. Holding cash through the sideways market, he added, had not harmed investor returns and provided assistance “at the margin.”

Portfolio Holdings and Broader Concerns

Thakkar defended the fund’s exposure to HDFC Bank, clarifying that reported issues do not appear to threaten its customer franchise. The outlook on its basket of four private banks remains unchanged.

He also dismissed several prevailing market anxieties, categorizing them as recurring “manic/depressive mood swings” rather than new developments.

• India’s lack of homegrown AI models
• Capital gains taxes
• The Securities Transaction Tax
• The rupee’s performance

Addressing the IT services sector, Thakkar viewed fears of AI-led job losses as “largely overblown at the aggregate level,” drawing parallels with past concerns about bank computerisation. He considers the current sector sell-off an opportunity.

For the fund’s hyperscaler holdings, Thakkar underscored that these companies maintain core businesses beyond AI, and any capital expenditure overcapacity is likely cyclical. The fund holds no direct exposure to pure-play AI model companies.

Finally, concerns surrounding IEX were addressed, with Thakkar stating that market-coupling issues apply to a sub-1% portfolio position. He dismissed the perspective of the exchange’s market share falling to a third as “simplistic.”

Thakkar concluded by citing Screener.in data from August 4, which showed the Nifty 100 trading at a PE of 20.8, significantly lower than the Nifty Midcap 150 at 30.7 and the Nifty Smallcap 250 at 34.6. This data, he argued, challenges the notion that smaller companies inherently deliver higher returns.