Indian equities rebounded on Tuesday after tumbling in the previous session, with IT stocks leading the recovery.
That said, the BSE Sensex rallied as much as 0.96% to an intraday high of 72,620.91, while the Nifty 50 climbed up to 0.97% to hit 22,581.15 on Tuesday. Nifty IT index, too, surged 4.49% to hit an intraday high of 29,623.90 levels.
Pankaj Murarka, CIO of Renaissance Investment Managers, said Indian markets are in the middle of a sectoral rotation and that information technology (IT) companies could emerge as growth stocks for the next decade, supported by accelerating artificial intelligence (AI) revenues and margins.
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Murarka said IT companies are prioritising investments and growth, while AI revenues and margins are consistently accelerating.
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He also highlighted an unwinding of the AI infrastructure trade, arguing that all three layers of AI infrastructure are becoming commoditised.
The remarks come as global technology stocks face selling pressure amid concerns over competition from China and the sustainability of AI spending.
The market rebound came amid multiple triggers, including the expiry of Nifty weekly contracts and gains in IT stocks, which rallied as much as 4.5%.
The sectoral recovery was led by HCLTech after its September-quarter results beat Street estimates.
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Global chip stocks slid amid concerns over competition from China, triggering a broader technology sell-off. South Korea’s KOSPI plunged more than 6%, while Samsung shares fell 7.5% and SK Hynix tumbled 9%. The US semiconductor index declined 2.7%.
The sell-off has raised questions among investors about the sustainability of the AI spending cycle.
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Amid this backdrop, Murarka’s assessment points to a distinction between the unwinding of the AI infrastructure trade and the longer-term growth prospects of IT companies.
With AI revenues and margins consistently accelerating, he believes IT companies could become growth stocks for the next decade, even as the market reassesses the AI infrastructure investment cycle.
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