India

Synopsis

India’s IT sector faces uncertainty as global slowdown and AI fears spook investors. Market expert Daljeet Kohli advises caution, citing lack of growth and difficulty in identifying future winners. At the same time, Reliance Jio’s IPO is seen as a strategic move to unlock value and offer a targeted bet on India’s telecom growth, separating it from the conglomerate’s other businesses.

ETMarkets.comIndia’s information technology sector, a wealth engine for the country for 30 years, is at a crossroads. A brutal liquidation triggered by weak global signals, Accenturethe cautious comment of and the broader concern regarding AI disruption left investors scrambling for answers. For Daljeet Kohlian independent market expert, the answer is simple: stay away.

‘The jury is still out’: Why Kohli has no IT exposureKohli has had a bearish view of the sector for several months and is not softening his stance. His main concern is not the demise of Indian IT companies, it is clear that will not be the case, but the defining characteristic of the sector, growth, is missing. “My investment style is basically growth and that is going to be lacking here,” he told ET Now, adding that the market’s overreaction to every weak data point indicates how wary investors are of the sector’s near-term trajectory.

Accenture’s numbers, which spooked the market, were not catastrophic on their own. But Kohli says the severity of the backlash reflects a deeper consensus: The growth trajectory of Indian IT majors over the next few years appears structurally in question. Although some niche players and those who successfully pivot to AI-based services may survive and thrive, he cautions that it is almost impossible to identify these winners at present. “Who will survive? The jury is still out.”

“When a sector becomes irrelevant, it takes a long time. Equity markets are all forward-looking, and we are very clear that this sector will take a long time to stabilize,” says Kohli.

Jio IPO: value release, no cash flow crisis
Moving on to the other headline of the day, Reliance Jio’s DRHP hit the market, a fresh issue of 27 crore shares that reignited the debate over where the profits would go. According to Kohli, it is less about raising emergency capital and more about unlocking strategic value.

Telecom is a constantly capital-hungry business, he notes, with constant technology upgradation, integration of AI, application ecosystems and fierce two-player competition with Bharti Airtel all requiring continued investment. But the IPO’s deeper goal, he says, is to give investors a clean, direct way to bet on India’s telecom story, without the baggage of Reliance’s oil refining and retail businesses. “If someone wants to go into just the telecom sector and not the traditional sectors, this will give them an opportunity,” Kohli said.

For long suffering Reliance shareholders which have seen the stock stagnate, the listing could be the catalyst the market has been waiting for – separating Jio’s high-growth digital narrative from the conglomerate’s legacy valuation drag.

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