Speaking at the Groww India Investor Festival 2026 in Mumbai during a session titled The Art of Not Losing Money, the two fund managers shared their views on the changing IT landscape and whether AI could fundamentally alter the future of Indian software services companies. Both fund managers said that they are finding opportunities in IT even as broader sentiment towards the sector remains cautious.
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Veteran fund manager Sankaran Naren described the current setup in the IT sector as a “contrarian valuation call”, though he acknowledged that the industry still faces genuine disruption risks from AI.
“It is a contrarian valuation call. But whether it is a value trap, that is not clear,” Naren said at the event.
According to him, markets have sharply de-rated IT companies because investors fear that AI could reduce demand for traditional coding and software services. However, he said it is still unclear whether the sector is facing a structural disruption or merely a cyclical slowdown linked to changing global spending priorities.
“We are grappling with whether this is a value trap because of disruption, or a cyclical slowdown because of what is happening with AI capex. We are still doing the work,” he added.Naren also pointed out that if AI-led disruption becomes severe enough, the impact may not remain restricted to IT services alone.
“If AI is truly disruptive, several sectors will get disrupted. But the market is selectively punishing IT,” he said, while noting that allocations to the sector among mutual funds remain relatively low.
Rajeev Thakkar, on the other hand, highlighted how Indian IT companies have repeatedly navigated major technological shifts over the last three decades.
“In the late 1990s, people thought these companies were only about Y2K. Then came the dotcom crash. Later during the SaaS wave, people questioned why clients would even need IT services companies,” he said.
According to Thakkar, the industry has historically adapted to disruptions rather than getting displaced by them.
“People are now saying this time it is different, that AI is replacing developer work and there may not be enough work to go around,” he said.
However, Thakkar argued that AI-driven productivity may ultimately expand demand rather than shrink it. Referring to the economic principle known as Jevons’ Paradox, he explained that lower costs often lead to higher overall consumption.
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“If 10 people can now do the work of 50, costs come down. But lower costs can also increase usage and demand,” he said.
He drew parallels with industries such as telecom and discount broking, where falling costs eventually expanded customer adoption and overall market size.
Despite their constructive stance, both fund managers maintained that their outlook remains dynamic and dependent on how the AI narrative evolves globally.
“As of now, that is the base case. But as Naren said, we will have to keep re-evaluating,” Thakkar added.
The broader discussion focused on risk management, capital preservation and disciplined investing, but the relatively optimistic view on IT stood out at a time when the sector remains largely out of favour among investors.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
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