Axis MF's Shreyash Devalkar on why India's IT stocks are still a tactical bet

What happened

Axis Mutual Fund equity head Shreyash Devalkar said Indian technology stocks could recover as valuations have become more reasonable, but remain a tactical opportunity until revenue growth improves. He said large-company IT earnings growth is below 5%, and sustainable long-term prospects require dollar revenue growth to approach high single digits.

Confirmed

Global impact / market context

The distinction between a valuation bounce and sustained growth matters because a higher share price alone may not last if companies’ revenue remains weak. Stronger dollar revenue growth could support earnings and make IT stocks more credible as long-term investments, while AI-related spending may benefit some infrastructure-linked firms.

Analyst inference

Devalkar described a two-sided AI spending effect: Indian IT services firms are exposed to shifts in technology spending, while some mid- and small-cap firms are linked to power infrastructure and data-center investment. He also said dividends add to potential returns, alongside more reasonable valuations.

Confirmed

What to watch

1. Watch whether dollar revenue growth moves toward the high single digits; Devalkar identified that level as necessary for a sustainable long-term investment case in the sector. Analyst inference
2. Track whether earnings growth, particularly at large IT companies, improves from below 5%, since weak earnings could limit the durability of a valuation-led recovery. Analyst inference
3. Observe whether AI-linked investment reaches power infrastructure and data centers, where some mid- and small-cap companies have direct or indirect capital-spending connections. Analyst inference

Evidence

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