Speaking to ET Now, Khemani argued that AI is transforming the technology landscape but is unlikely to diminish the relevance of IT services. Instead, companies that adapt quickly are likely to emerge stronger over the coming years.
“Clearly, it has been in transition. There is no denial that AI has been a disruptive technology, but we have long maintained that while this transformation will happen, IT services companies will tend to gain from it as an industry,” he said.
He noted that every major technology shift—from Y2K to enterprise digitisation and cloud migration—ultimately expanded the industry’s addressable market rather than shrinking it.
“The whole narrative that AI will kill the IT industry itself was, in our opinion, wrong,” he said.
Khemani added that while questions around the return on AI investments and trust issues could temporarily slow adoption, IT companies are increasingly deploying AI to improve productivity and reduce delivery costs. He believes the ongoing correction has created an attractive entry point for investors with a two-to-four-year horizon.Stock selection will be the key in the AI eraWhile optimistic on the sector, Khemani cautioned against treating all technology companies equally. According to him, the winners will be those that embrace AI the fastest, particularly in the mid- and small-cap space.”It does not mean that all the companies will benefit from this transition. Some will be fast to adapt, some will be slower. The real thing is identifying those companies,” he said.
Adani equity fundraising reflects investor confidenceCommenting briefly on Adani Enterprises’ enlarged Qualified Institutional Placement (QIP), which attracted strong institutional participation, Khemani described the successful fundraising as positive for the company.
“That is good news. It is a good company. We have not participated.” However, he refrained from offering broader comments on the Adani Group or individual stocks.
Financials remain well placed despite deposit concernsTurning to the banking sector, Khemani acknowledged that slower deposit mobilisation remains a challenge for the banking system but believes the broader outlook for financials remains constructive.
He expects lower interest rates to support the sector and sees credit growth remaining healthy despite variations across individual segments.
“Credit growth, in my opinion, has been in a decent range for quite some time… With interest rates coming down, it will all be positive for financials,” he said.
He also clarified that slower deposit growth should not be confused with a liquidity crisis, pointing to the Reserve Bank of India’s efforts to maintain adequate liquidity in the financial system.
Earnings growth story remains intactAs the June-quarter earnings season begins, Khemani expects corporate India’s earnings momentum to remain resilient despite temporary disruptions caused by geopolitical tensions in West Asia.
He projects overall earnings growth of 14-16% for the year, supported by healthy macroeconomic indicators including GDP growth, GST collections and direct tax revenues.
“I see no reason why India’s earnings growth will not be between 14% and 16%,” he said.
While some companies may have faced logistical challenges during the West Asia conflict, he believes those disruptions are already beginning to fade as oil prices ease and supply chains normalise.
Limited interest in oil & gasDespite lower crude oil prices, Khemani said his investment approach has largely avoided oil and gas companies because of policy-related uncertainties.
“We have not really invested in that segment because it is largely a government-interfered segment,” he said.
EV adoption is acceleratingKhemani remains optimistic about India’s electric vehicle opportunity, describing EV adoption across both passenger vehicles and two-wheelers as a structural trend that is only gaining momentum.
Instead of betting on original equipment manufacturers (OEMs), he prefers auto ancillary companies, which he believes offer broader exposure to the EV ecosystem with better investment opportunities.
“We have been more positive playing through auto ancillaries rather than the OEMs,” he said.
Staples could enjoy a margin boostConsumer staples companies could benefit over the next few quarters as easing commodity prices and improving supply chains support profitability.
According to Khemani, companies generally retain pricing even after raw material costs soften, allowing margins to expand.
“After a spike in costs and increasing prices, these companies generally tend to have margin expansion,” he said.
Valuations keep him cautious on value retailIndia’s organised value retail segment continues to post robust growth, driven by strong execution and customer demand. However, Khemani believes rich valuations have limited the attractiveness of the space from an investment standpoint.
“The segment has been doing well because these companies have delivered good value to customers. The only question for us has been around valuations,” he said.
IT stands out as the market’s contrarian opportunityAsked about contrarian investment ideas, Khemani returned to the IT sector, describing it as one of the few areas where investor ownership and sentiment remain subdued despite improving long-term fundamentals.
“IT could be one contra bet. There is disinterest, underownership is there, so that definitely can be looked at as a contra play,” he said.
Power remains a multi-year investment themeKhemani also remains constructive on the power sector, citing rising electricity demand from India’s economic expansion as well as the global AI boom.
He expects sustained investment across power generation, transmission and distribution, benefiting both conventional and renewable energy businesses.
“India needs to invest a lot in generation, distribution and across the value chain… this segment is likely to remain quite robust both because of the domestic investment cycle as well as the global investment cycle,” he said.
