At a time when markets are grappling with AI disruption fears, range-bound indices and uncertainty around earnings revival, Kenneth Andrade, Founder and CIO of Old Bridge Mutual Fund, is making a decisive tactical call: he would hold no IT stocks if he were building a fresh portfolio today.
The view comes amid growing debate around AI-led job cuts globally, margin pressure in IT services and questions over how technology will reshape employment and long-term profitability. While not structurally bearish on the sector, Andrade said investors need to reassess terminal value assumptions and identify which businesses can truly compound over the next decade.
"Valuations are cheaper than before - that's positive. But we need to recalibrate what makes money over the next 10 years," he said, adding that IT could re-enter portfolios at the "appropriate time and with the appropriate business."
Instead, Old Bridge portfolios are currently tilted toward pharmaceuticals, metals and select commodities, along with automobiles benefiting from offshore demand. He also sees selective opportunities in discretionary consumption segments such as quick-service restaurants, where much of the pessimism is already priced in.
AI Disruption: Limited Near-Term Pain
On concerns that AI-led job rationalisation abroad could spill over into India, Andrade took a balanced stance.
"In the near term, you won't see too much of that happening," he said, acknowledging that while automation will alter employment structures over time, economies adapt. Technology investments, he argued, could spur capex cycles that create fresh employment avenues even as older roles evolve or disappear.
Profit margins in IT services may face pressure, but he views the transition as part of a longer business cycle rather than an abrupt shock.
Markets Need Earnings, Not Just Sentiment
With indices trading in a tight range, Andrade believes earnings revival - not just trade deal optimism - will be key to breaking out. India has seen single-digit earnings growth for nearly two years, and meaningful demand recovery may take time.
While trade agreements with the US and potentially the European Union could open up large consumption markets, he expects tangible benefits to reflect meaningfully only from 2027 onwards.
Regulatory moves in capital markets, including discussions around F&O participation, are part of a natural cycle. "Stock corrections often happen because valuations price in perfection," he noted.
On banking and financial services, Andrade said the sector remains structurally strong but unlikely to keep expanding its dominance in market capitalisation. Stock-specific selection, rather than broad allocation, is key.
Meanwhile, specialty chemicals - under pressure for several years - may be nearing a cyclical bottom. Capex has slowed, volumes are stabilising and consolidation is visible, though profitability recovery could still take six to twelve months.
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