Contrarian investing at PPFAS

From WebNotes, a public knowledge base. Last updated 16 May 2026. Reading time ~13 min.

Contrarian investing at PPFAS is the deliberate willingness of the PPFAS Mutual Fund investment team to build and hold portfolio positions in sectors and securities subject to negative broader-market sentiment, when the disciplined fundamental analysis and intrinsic-value estimation supports the underlying business thesis. The doctrine is closely related to, but conceptually distinct from, the margin of safety discipline and the owner-mindset doctrine: contrarian positioning is the specific behavioural willingness to act against prevailing sentiment when the analysis supports doing so, with attendant tolerance for extended periods of category-relative underperformance and willingness to accept the discomfort of holding out-of-favour positions through their sentiment cycle.

The contrarian discipline at PPFAS is anchored in the broader value-investing tradition articulated by Benjamin Graham (the willingness to buy when “Mr Market” is offering favourable prices), Warren Buffett (the formulation “be fearful when others are greedy and greedy when others are fearful,” articulated in the 1986 Berkshire Hathaway annual letter), Howard Marks (the cycle-aware contrarian framework articulated in The Most Important Thing and the long-running Oaktree memos), and David Dreman (the contrarian-investing framework articulated in Contrarian Investment Strategies, 1979, and subsequent editions). At PPFAS, the discipline has been articulated by founder Parag Parikh in his books and columns, and is operationalised by Chief Investment Officer Rajeev Thakkar, Head of Research Raunak Onkar, and the broader investment team.

The contrarian discipline at PPFAS has produced several notable case studies, most prominently the PSU contrarian build of approximately 2018 to 2022, during which PPFAS built and held substantial positions in Coal India, Power Grid Corporation of India, NTPC, and ONGC at points when broader-market sentiment toward Indian Public Sector Undertakings was deeply negative. The PSU contrarian build was validated by the rotation toward PSU equities during 2023 to 2024, with several PSU positions reaching multi-year highs and Power Grid Corporation reaching the second-largest Parag Parikh Flexi Cap Fund holding at 6.99 per cent in the April 2026 factsheet.

This article is the principal Tier-3 reference on contrarian investing within the broader PPFAS investment philosophy corpus.

Foundation and origin

Graham’s Mr Market and the contrarian foundation

Benjamin Graham’s Mr Market allegory in chapter 8 of The Intelligent Investor (1949) provides the implicit foundation for the contrarian discipline. Graham characterised the market as an emotional partner whose mood swings produce opportunities for the disciplined investor to buy when Mr Market is pessimistic and sell when Mr Market is overly optimistic. The contrarian discipline is the explicit application of this orientation: deliberate willingness to act against the prevailing market mood when the underlying business analysis supports the contrarian view.

Warren Buffett’s articulation

Warren Buffett’s 1986 Berkshire Hathaway annual letter contains the well-known formulation:

A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful.

Buffett’s October 2008 New York Times op-ed “Buy American. I Am.” was the public articulation of the contrarian discipline during the global financial crisis, when Buffett deployed Berkshire capital into substantial positions in Goldman Sachs, General Electric, and other distressed-but-fundamentally-sound positions.

Howard Marks and the cycle-aware framework

Howard Marks, the co-founder and co-chairman of Oaktree Capital Management, developed the cycle-aware contrarian framework in his Oaktree memos (long-running since 1990) and in The Most Important Thing: Uncommon Sense for the Thoughtful Investor (Columbia, 2011) and Mastering the Market Cycle: Getting the Odds on Your Side (Houghton Mifflin Harcourt, 2018). The Marks framework emphasises:

The pendulum analogy. Market sentiment oscillates between extremes of optimism and pessimism, providing contrarian opportunities at the extremes.
Second-level thinking. The disciplined contrarian thinks not about the asset’s underlying value but about how the consensus view of that value will evolve.
Risk asymmetry. Contrarian positions taken at extreme negative sentiment produce favourable risk-reward asymmetry through the eventual sentiment mean-reversion.

The Marks memos are referenced repeatedly in PPFAS investor education materials.

David Dreman and contrarian investment strategies

David Dreman’s Contrarian Investment Strategies (1979, with subsequent editions in 1998 and 2012) provides a quantitative-discount-based articulation of contrarian investing, with empirical evidence on the long-run outperformance of low-multiple stocks against high-multiple peers. The Dreman framework is referenced in PPFAS educational materials as one of the academic foundations for the contrarian discipline.

Indian-context articulation

Parag Parikh’s articulation of contrarian investing in the Indian context emphasised:

Willingness to act against the prevailing Indian-market narrative when the fundamental analysis supports the contrarian view.
Tolerance for extended periods of category-relative underperformance during the holding period.
Discipline against the social-proof bias (Munger’s herding tendency) that drives most Indian-investor behaviour.
The behavioural-finance underpinning of contrarian opportunities: market prices can diverge from intrinsic values for extended periods due to behavioural drivers documented in the behavioural finance literature.

These adaptations are visible in the contemporary PPFAS contrarian discipline.

Application at PPFAS

Building positions against prevailing sentiment

The PPFAS contrarian discipline operates through deliberate willingness to build positions when broader-market sentiment is negative:

Sector contrarian positioning. Willingness to overweight sectors subject to negative consensus sentiment, when the fundamental analysis supports the underlying business thesis. The PSU contrarian build is the principal example.
Security-level contrarian positioning. Willingness to build positions in individual securities subject to specific negative sentiment, when the fundamental analysis supports the underlying business thesis.
Sentiment-based entry-point identification. Use of broader-market sentiment as one of the entry-point indicators, with willingness to deploy capital at sentiment extremes.

Holding through extended underperformance

The contrarian discipline includes willingness to hold positions through extended periods of category-relative underperformance:

Position-holding through sentiment troughs. Continued holding of positions during periods when broader-market sentiment toward the holding remains negative.
No reduction on category-relative underperformance. Position adjustments are made for fundamental reasons (deterioration in business position) or valuation reasons (prices reaching the upper bound of intrinsic-value estimates), not on the basis of category-relative performance.
Tolerance for tracking error. Acceptance of substantial tracking error versus the Nifty 500 TRI benchmark during periods of contrarian holding.

Building positions in temporarily distressed businesses

The contrarian discipline includes willingness to build positions in temporarily distressed businesses, provided the disciplined fundamental analysis supports the underlying business thesis:

Cyclical-distress positioning. Willingness to build positions in cyclical businesses during cyclical-downturn phases when intrinsic-value assessment supports the position.
Regulatory-uncertainty positioning. Willingness to build positions in businesses subject to regulatory uncertainty when the long-term business thesis is robust to the regulatory outcomes.
Litigation-overhang positioning. Willingness to build positions in businesses with pending litigation when the financial impact is bounded and the underlying business retains its competitive position.

Avoidance of value traps

The contrarian discipline at PPFAS is distinguished from indiscriminate value-trap exposure through:

Integration with qualitative business-quality assessment. Contrarian positions are not built on quantitative-discount filters alone but on the combination of quantitative discount and qualitative business quality.
Avoidance of secular-decline industries. Industries facing secular decline (where the negative sentiment may reflect accurate assessment of intrinsic-value impairment) are typically avoided.
Documented investment process. The investment-process page at amc.ppfas.com/schemes/investment-process/ requires fundamental research, intrinsic value estimation, and margin-of-safety assessment before any position commitment.

Documentation in monthly factsheets

The contrarian discipline is articulated repeatedly in PPFAS monthly factsheet commentary by Rajeev Thakkar:

Specific position-building decisions are explained in the factsheet commentary, with the underlying business thesis articulated.
Sentiment context is acknowledged, with explanation of why the contrarian position is being taken despite the prevailing sentiment.
Holding-period commentary addresses the continued discipline through periods of category-relative underperformance.

The PSU contrarian build as a detailed case study

Context

During approximately 2018 to 2022, broader-market sentiment toward Indian Public Sector Undertakings (PSUs) was deeply negative. The PSU sector underperformed the broader Indian market substantially, with the Nifty PSE index and other PSU-focused indices producing extended returns below the broader Nifty 500 TRI. The negative sentiment reflected:

Concerns about government interference in PSU operational decisions.
Concerns about disinvestment-driven supply overhang.
Concerns about competitive position in increasingly liberalised sectors.
Concerns about ESG considerations particularly in coal-and-fossil-fuel sectors.
Mean-reversion fatigue from sustained underperformance.

PPFAS contrarian build

PPFAS built and held substantial positions in:

Coal India. Long-running position, top-tier holding through multiple periods, third-largest PPFCF position at 5.95 per cent in the April 2026 factsheet.
Power Grid Corporation of India. Long-running position, second-largest PPFCF position at 6.99 per cent in the April 2026 factsheet.
NTPC. Periodic significant holding.
ONGC. Periodic significant holding.

The position-building was based on:

Capital-intensive moats. Many PSUs operate in regulated-utility or infrastructure businesses with durable competitive advantages.
Attractive valuations. PSUs traded at substantial discounts to private-sector peers, providing the Graham margin of safety.
High dividend yields. PSUs typically offered attractive dividend yields from sustainable payout ratios.
Underlying business durability. The underlying businesses (coal mining, electricity transmission, power generation, oil and gas) retained their competitive position despite the negative sentiment.

Holding through the underperformance cycle

PPFAS held the PSU positions through extended periods of category-relative underperformance, with the positions reaching low points in the 2020 and 2021 periods. The continued holding required:

Tolerance for tracking error against the benchmark.
Tolerance for category-relative underperformance reporting in factsheets and media coverage.
Continued articulation of the contrarian thesis in monthly factsheet commentary.
Investor education on the contrarian discipline at the Annual Unitholders’ Meet.

Validation through the 2023 to 2024 rotation

The rotation toward PSU equities during 2023 to 2024, driven by changes in capital-allocation policies, dividend-yield search, and renewed appreciation for capital-intensive moats, validated the contrarian discipline. Multiple PSU positions reached multi-year highs, with Power Grid Corporation and Coal India reaching their respective top-3 PPFCF positions by April 2026.

Other contrarian case studies

The long-running ITC position

PPFAS held a substantial position in ITC across multiple periods, with ITC reaching the top three PPFCF holdings (7.99 per cent in one disclosure during 2025) during periods of consumer-staples underperformance. The contrarian application:

Continued holding through extended periods (2017 to 2022) when ITC underperformed the broader market.
Underlying thesis on durable consumer franchises, reasonable valuations, and attractive dividend yields.
Validation through the 2023 to 2024 ITC mean-reversion.

The international holdings through 2022 cap restrictions

PPFAS’s continued holding of core international positions (Alphabet, Microsoft, Amazon, Meta) through the SEBI MF overseas investment cap restrictions in February 2022 represents a contrarian discipline in the operational sense: continued conviction in the underlying business thesis despite the structural inability to add to positions.

The 2024 to 2026 cash discipline

The PPFCF cash discipline of 18 to 25 per cent during 2024 to 2026 represents a contrarian discipline at the aggregate portfolio level: deliberate refusal to deploy capital at the broadly elevated valuations characterising the broader market, in contrast to the near-fully-invested positioning at peer Indian flexi-cap funds.

Comparison with broader industry approaches

Indian flexi-cap peer comparison

The typical Indian flexi-cap mutual fund operates without explicit contrarian discipline. Portfolio construction at peer funds is typically organised around relative-performance benchmarking, sector positioning aligned with consensus narratives, and category-relative weight allocation. PPFAS’s explicit contrarian discipline is structurally distinctive in:

Willingness to overweight out-of-favour sectors.
Tolerance of extended category-relative underperformance.
Public articulation of contrarian positions in monthly factsheet commentary.
Investor communication that addresses the discipline directly.

Indian value-fund peer comparison

A small number of Indian asset management companies operate explicitly labelled “value funds” under the SEBI scheme rationalisation circular 2017 value-fund category, with some applying contrarian disciplines within the value-fund mandate. PPFAS operates PPFCF as a Flexi Cap with contrarian discipline as a sub-component of the broader value-investing framework.

Global contrarian-investing peer comparison

Globally, the contrarian discipline is practised by Berkshire Hathaway, Oaktree Capital, Baupost Group, Pabrai Investment Funds, and others. PPFAS sits within this tradition, with operational adaptations to the Indian regulatory and tax environment.

Recent developments

2024 to 2026 contrarian discipline

During 2024 to 2026, the contrarian discipline has been applied to:

The cash discipline of 18 to 25 per cent at PPFCF.
Continued holding of the PSU positions despite multi-year price appreciation, with reassessment of intrinsic-value estimates.
Continued holding of core international positions despite structural constraints from the SEBI overseas-investment-cap framework.

Finance Act 2024 tax impact

The Finance (No. 2) Act 2024 raised the long-term capital gains rate on listed equity to 12.5 per cent under amended Section 112A. The higher LTCG rate increases the compounding benefit of the long-holding-period discipline that often accompanies contrarian positioning.

Annual Unitholders’ Meet discussion

The 12th Annual Unitholders’ Meet (22 November 2025, Birla Matushree Sabhaghar, Mumbai) included direct discussion of contrarian positions in the Q&A session, with continued articulation of the underlying business thesis.

Criticism and debates

Value trap risk

A recurring critique of contrarian investing is the value-trap risk: contrarian positions taken on the basis of quantitative discount filters alone can be subject to permanent intrinsic-value impairment. PPFAS’s response, consistent with the Munger principle of avoiding stupidity, is the integration of qualitative business-quality assessment with the quantitative contrarian filter.

Extended underperformance

The contrarian discipline can produce extended periods of category-relative underperformance, which produces investor-discomfort and potential AUM outflows. PPFAS’s response is the consistent articulation of the discipline in monthly factsheet commentary, the long-term track-record validation, and the willingness to accept short-term outflows in exchange for through-cycle compounding.

Subjectivity of sentiment assessment

The identification of “negative sentiment” suitable for contrarian positioning is necessarily subjective. PPFAS’s response is the documented investment process and the focus on intrinsic-value estimation rather than sentiment-only contrarian positioning.

External references

References

Benjamin Graham, The Intelligent Investor, Harper and Brothers, 1949.
Warren Buffett, Berkshire Hathaway annual letter, 1986; “Buy American. I Am.” New York Times op-ed, October 2008.
Howard Marks, The Most Important Thing: Uncommon Sense for the Thoughtful Investor, Columbia, 2011.
Howard Marks, Mastering the Market Cycle, Houghton Mifflin Harcourt, 2018.
David Dreman, Contrarian Investment Strategies, Random House, 1979 (and subsequent editions).
Parag Parikh, Stocks to Riches, Tata McGraw-Hill, 2005.
Parag Parikh, Value Investing and Behavioral Finance, Tata McGraw-Hill, 2009.
PPFAS Mutual Fund monthly factsheets, May 2013 to April 2026.
PPFAS Mutual Fund April 2026 factsheet, amc.ppfas.com/downloads/factsheet/.
Business Today coverage of PPFCF holdings disclosures, 2025 and 2026.

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Last reviewed: 16 May 2026
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