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AI Fears Overblown? Expert Sees Growth in IT, Banks
16 Feb
Summary
- AI concerns for Indian IT are exaggerated, market reacting to scale.
- PSU banks offer attractive value despite strong recent performance.
- New trade deals signal major structural shift for export sectors.
Concerns regarding artificial intelligence (AI) significantly disrupting Indian IT companies are likely overstated, according to Mukul Kochhar, Head-Equities at Investec Capital Services. He suggests that recent IT stock weakness stems from the natural deceleration of growth in very large companies rather than AI replacing service work. Similar productivity waves in the past have not led to the feared disruptions.
Kochhar remains optimistic about the broader financial sector, with a particular emphasis on public sector banks (PSUs). He points out that PSU banks continue to present compelling investment cases due to substantial improvements in profitability and balance sheets. Despite strong past performance, their valuations remain inexpensive, often trading below book value while delivering around 15% return on equity.
Furthermore, Kochhar identifies India's expanding global trade relationships as a key investment opportunity. He describes recent trade agreements as a major structural shift that will enhance India's integration into global supply chains. Sectors poised to benefit significantly include textiles, auto components, electronics, and gems and jewellery, with potential for substantial stock performance.
