Indian IT sector looks compelling with AI transformation says Deven Choksey

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The Indian information technology (IT) sector presents a compelling investment case, buoyed by the industry's adoption of artificial intelligence (AI) and the resulting business transformation, according to market expert Deven Choksey. Speaking with CNBC TV18, Choksey shared a positive outlook on large-cap IT stocks, even while acknowledging questions around potential regulatory changes like the new H-1B visa system in the United States.

Choksey's optimism is rooted in two key developments. Firstly, he highlighted that major IT companies have fundamentally changed their operations by integrating AI into their back-end coding processes. Secondly, this internal transformation is translating into new business opportunities, as clients are beginning to place new orders driven by their own needs for AI-led digital transformations.

"We believe that in general, the IT space looks I think quite compelling now. They have adopted in their back-end the entire AI way of coding," Choksey stated. He noted that prominent companies like Tata Consultancy Services (TCS) and Infosys are at the forefront of this shift, creating separate, dedicated modules and applications for various user industries to facilitate this transition.

While Choksey mentioned that he had not deeply examined the specific impact of the new H-1B visa rules, he believes the sector's fundamentals make it a relatively safe and improved investment compared to its previous state. He cautioned that a sharp, immediate spike in order intake or execution is not yet visible. However, he projected a sustainable growth trajectory for the near future.

"Maybe if one is comfortable, I think between a higher single digit to the mid-double digit, that kind of a growth is distinctly possible in the revenue stream of many of these companies," he projected. Choksey concluded by identifying Infosys and TCS as being "relatively better placed" at their current valuations, suggesting they appear relatively better placed at current valuations, for investors looking to capitalise on the AI-driven evolution of the IT services industry.