Veteran Fund Managers See Value in Indian IT Stocks Despite AI Disruption Fears
Two of India’s most respected fund managers, Rajeev Thakkar and Sankaran Naren, have recently shared their views on the information technology sector. Both believe that select Indian IT stocks are becoming attractive investment opportunities. This comes at a time when many investors are worried about artificial intelligence disrupting the traditional business models of IT companies.
Rajeev Thakkar is the Chief Investment Officer at PPFAS Mutual Fund. Sankaran Naren is the Chief Investment Officer at ICICI Prudential Mutual Fund. Their opinions carry significant weight in the Indian investment community. Their recent comments suggest that the current fear around AI might be creating a buying opportunity in the IT sector.
Naren Calls IT a Contrarian Valuation Play
Sankaran Naren described the IT sector as a contrarian valuation play. This means he believes the sector is undervalued compared to its long-term potential. He acknowledged that there are possible risks, especially from AI disruption. However, he sees the current low valuations as an attractive entry point for patient investors.
Naren’s view is important because he is known for his contrarian approach. He often invests in sectors that are out of favor with the market. His track record shows that he has successfully identified value in beaten-down sectors before they recovered. He is not ignoring the AI threat but believes the market has already priced in too much negativity.
Thakkar Highlights Historical Adaptability of Indian IT
Rajeev Thakkar offered a different but complementary argument. He pointed out that Indian IT firms have historically adapted well to major technological shifts. From the Y2K bug to cloud computing, Indian companies have consistently reinvented themselves. Thakkar believes they will do the same with AI.
He also made an important point about AI-driven productivity. Many investors worry that AI will reduce the need for human workers in IT services. Thakkar argues the opposite could happen. When technology makes services cheaper and more efficient, demand often expands. For example, when cloud computing reduced the cost of data storage, companies started storing much more data. The total spending on cloud services grew dramatically.
Similarly, if AI makes software development faster and cheaper, more companies may choose to digitize their operations. This could create more work for IT service providers, not less. Indian IT firms could benefit from this expanded demand.
What This Means for Investors
For general investors, these views offer a balanced perspective. The IT sector has faced significant selling pressure in recent months. The Nifty IT index has underperformed the broader market. Many investors are worried that AI will make traditional IT services obsolete.
However, Thakkar and Naren suggest that the fear may be overdone. They are not saying that all IT stocks are safe. They are saying that selective stocks in the sector offer good value at current prices. Investors should look for companies with strong balance sheets, diversified service offerings, and a track record of adapting to change.
It is also important to remember that both fund managers are long-term investors. They are not making short-term trading calls. Their views are based on a horizon of several years. Short-term volatility in IT stocks is still possible.
Risks to Consider
Despite their positive view, both managers acknowledge the risks. AI disruption is real. Some IT services may become obsolete. Companies that fail to adapt could suffer. The pace of AI adoption is uncertain. If AI disrupts faster than expected, even well-managed IT firms could face headwinds.
Currency risk is another factor. Indian IT companies earn a large portion of their revenue in US dollars. A stronger rupee can hurt their profits. Global economic conditions also matter. If the US economy slows down, IT spending could decline.
Final Thoughts
The views of Rajeev Thakkar and Sankaran Naren provide a useful counterpoint to the prevailing pessimism about Indian IT stocks. They suggest that the sector’s current low valuations may offer a good entry point for long-term investors. While AI disruption is a real risk, Indian IT firms have a history of adapting to change. The potential for AI to expand overall demand for IT services is an often-overlooked positive factor.
Investors should do their own research before making any decisions. But the opinions of these two veteran fund managers are worth considering. They see value where others see only risk. That is often the hallmark of a good investment opportunity.
