Equity markets showed a promising outlook for India's automotive sector on Wednesday, while the recent slump in information technology stocks, fueled by artificial intelligence developments, has created a favourable entry point for long-term investors, according to Sachin Shah, executive director and fund manager at MK Investment Managers.
Shah noted that while the IT sector underperformed over the last week, the decline was primarily driven by global news flow regarding AI applications rather than poor company performance.
"The valuations are very, very reasonable in each of these sectors," Shah said. "For actually investors who have a next probably six to 18 months kind of a perspective, the risk-reward is actually favourable".
He also talked about the automotive sector, which remains a point of strength, with companies like Mahindra & Mahindra, Eicher Motors and Maruti delivering strong results despite concerns over raw material inflation and market discounting.
Shah credited GST reforms for sustaining consumer demand for two-wheelers and passenger vehicles, while also noting a recent uptick in the commercial vehicle cycle.
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Addressing the rise of AI, Shah emphasised that the technology's impact would extend beyond IT into pharmaceutical research, wealth management and automotive industries.
"AI — is it going to be an enabler or is it going to be disruptive — is a function of how you embrace it as every individual company and actually take advantage of it," Shah said. "Everybody is going to use AI because it will bring in a lot of efficiencies".
For medium- to long-term investment, Shah expressed positive sentiment toward private sector banking and financials, citing reasonable valuations and expected market growth over the next two years.
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