India tech sector offers attractive investment opportunities as it transitions to AI, says Richard Harris

Question

Are you looking at the India tech trade? The Indian tech trade, particularly the IT services companies, is a large $300 billion services industry and has been hammered since the start of the year. But now, as the anti-AI trade gathers steam, and we've seen the sell-off in the Korean and Taiwanese markets, some of these IT names are inching up. What are your thoughts?

Answer:

I am not necessarily a believer that the AI bubble is over yet. I think it'll continue. What we're seeing in Korea and elsewhere is really just a change from the big rises we've seen recently. So, I am not terribly surprised that we've seen a bit of a pullback. Markets were looking for an excuse, and the boss of Broadcom saying that it's all a bit of a gamble doesn't really help. But I think there's still enough energy in that market to keep it going. I am not sure it necessarily relates to what is happening in India. The tech sector is slightly different, but I do think India is starting to look quite interesting. I noticed that Prime Minister Narendra Modi was talking India up yesterday, saying it is somewhere that's reliable for instance. We've seen so many choke points around the world, but he's saying that India is reliable and open for business. I think that's actually looking to be quite a compelling argument, whether it comes from a politician or not, because India has lagged the global markets. But I think it does have a lot of scope in the tech area, even though companies are moving from old-economy tech to new-economy tech.

Question

The good news over the last few days is that the rupee has stabilised a little. From an investment perspective, how important is that from your standpoint? Also, there was a bit of buzz with regard to our Finance Minister's comments. Just acknowledging that they're having a bit of a look at equity taxation doesn't mean there's going to be any big change, but at least acknowledging it was something that led to a big spike yesterday. Tell us your views on both taxation in India and the stability of our currency.

Answer:

Obviously, stability in the currency is important because the currency, for an investor, is the canvas on which the whole painting is painted. So, it is important, but I think investors don't really look at the currency when they invest in India. They're looking much more at the kind of growth we're likely to see and the earnings you're likely to see. To a certain extent, that is going to counteract currency movements. And if investors are terribly worried and they're likely to invest in big stocks anyway, they're going to invest in companies that operate around the world. So those companies are naturally hedged against the domestic currency anyway. In terms of taxation one has to be slightly worried about rumours and comments that come out because you never quite know where they're going to lead. And yes, it's nice that there's a spike, but I always feel that one should really wait until either the news actually comes out, or we have enough rumours that we can really place some reliance on the fact that, yes, this is going to happen or not.