Daily Voice: Sell-off on AI disruption fears shows earnings catching up, but structural thesis intact, says Sonam Srivastava

Sonam Srivastava is the Founder and Fund Manager at Wright Research PMS

• Compared to many EMs, India offers stronger earnings visibility and political continuity
• Valuations are not cheap, so outperformance to depend on earnings delivery rather than multiple expansion
• Believe AI will materially alter employment composition, not eliminate work at scale

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Especially after recent AI-led disruption fears, Sonam Srivastava, the Founder and Fund Manager at Wright Research PMS believes AI is not a blanket threat to sectors, it is a margin redistributor.

According to her, historically, general-purpose technologies like cloud or the internet first disrupt margins, then create new pools of profit. The correction signals earnings reality catching up with narrative. It does not invalidate the structural AI thesis.

Further, she believes AI will materially alter employment composition, not eliminate work at scale. "In India, IT services may see slower headcount growth, but higher revenue per employee. Globally, white-collar automation is more at risk than blue-collar roles," she said in an interview to Moneycontrol.

Considering the recent fall in the US markets, do you expect AI to pose a major threat to several sectors rather than be beneficial?

The recent correction in US markets reflects valuation compression in AI-linked names rather than a structural rejection of AI. The market had priced in perfection, assuming exponential monetisation with linear capex. That rarely happens.

AI is not a blanket threat to sectors, it is a margin redistributor. Industries with high labour intensity and repetitive processes, IT services, BPO, basic content creation, may face pricing pressure. However, companies that integrate AI to improve productivity will expand operating leverage.

Historically, general-purpose technologies like cloud or the internet first disrupt margins, then create new pools of profit. The correction signals earnings reality catching up with narrative. It does not invalidate the structural AI thesis.

Are you confident about the significant impact of AI on employment going forward?

AI will materially alter employment composition, not eliminate work at scale. Productivity shocks tend to reduce low-skill repetitive roles while increasing demand for higher-skill integration, supervision, and domain expertise. The key variable is speed of adoption. If enterprise adoption accelerates faster than reskilling, short-term displacement rises.

In India, IT services may see slower headcount growth, but higher revenue per employee. Globally, white-collar automation is more at risk than blue-collar roles. Over a five-to-seven-year horizon, AI will reshape wage structures more than headline employment levels.

Do you see clear signs of strong earnings improvement after analysing the Q3 results season?

Q3 results suggest selective recovery rather than broad-based acceleration. Large private banks showed stable asset quality and steady credit growth. Capital goods and defence maintained order book visibility. IT commentary remained cautious with muted discretionary spending.

Consumption remains uneven, urban premium demand is holding while rural recovery is gradual. Overall earnings growth is stabilising in mid-teens territory but lacks sharp upgrade momentum. The market is rewarding earnings visibility and punishing guidance cuts. This is a stock picker’s environment, not a beta-driven rally.

Do you observe strong interest in small-caps, mid-caps, and new sectors, especially now that most of the negatives appear to be behind us?

There is renewed interest in small and mid-caps, but flows are more disciplined than the previous euphoric phase. Valuations had corrected meaningfully in several pockets, bringing risk-reward back to neutral. Domestic flows remain strong and retail participation continues, but investors are now differentiating between balance-sheet strength and narrative-driven growth.

New sectors like defence, renewables, and specialised manufacturing continue to attract capital due to structural tailwinds. The excess froth has reduced, but selectivity is critical because earnings delivery is still uneven.

Do you believe FY27 and the years beyond will be a strong period for economic growth?

FY27 and beyond can be structurally stronger if current investment momentum sustains. India’s capex cycle, government infrastructure push, manufacturing incentives, and supply chain diversification support medium-term growth. Corporate balance sheets are healthier than in the last cycle, and banking system stress is low.

However, export momentum depends on global demand recovery. If global growth stabilises and domestic consumption gradually broadens, India can sustain 6.5 to 7 percent real GDP growth. The foundation is stronger than the previous decade, but execution risk remains.

Have you started increasing exposure to export-led sectors, especially after the recent trade deals with the EU and the US?

We have started evaluating export-led sectors more constructively, particularly specialty chemicals, select auto ancillaries, and niche manufacturing. Trade agreements with the EU and US improve long-term competitiveness, but earnings impact will be gradual.

Currency stability and global demand recovery remain key variables. Exporters with diversified geography and strong pricing power are better positioned. The opportunity lies in companies that can gain market share rather than those dependent on a single external cycle.

Do you think Indian equity markets are likely to outperform others this year, particularly if the worst phase is behind us?

Indian equities have the ingredients to outperform if global volatility stabilises. Domestic flows, improving capex, and relative macro stability provide resilience. Compared to many emerging markets, India offers stronger earnings visibility and political continuity.

However, valuations are not cheap, so outperformance will depend on earnings delivery rather than multiple expansion. If global risk appetite improves and domestic earnings remain in the mid-teens range, India can deliver relative outperformance, though returns are likely to be more moderate than the previous post-pandemic surge.