AI to drive next tech rally? Why LIC MF’s Dikshit Mittal is not giving up on IT sector

The festive season demand, combined with robust government capex, is expected to provide a significant boost to consumption-linked stocks, says Dikshit Mittal, Senior Fund Manager – Equity at LIC Mutual Fund AMC.

In an interview with Ritik Raj of Business Today, Mittal identified import replacement as poised to be a defining theme for India over the next five years. He noted this strategic shift is driven by strong government support through PLI schemes, corporate willingness to invest, and a massive addressable opportunity in sectors like defence, electronics, and chemicals.

1. With festive season demand and robust govt capex, do you expect a short-term boost to consumption-linked stocks?

India’s consumption story remains one of the most enduring and powerful structural growth engines of the economy. Driven by rising household incomes, rapid urbanization, and a young, aspirational demographic, consumer behaviour is evolving—from basic necessities to premium products, lifestyle upgrades, and experience-led spending.

This transformation is being reinforced by supportive policy measures:

    • GST rate rationalization has reduced the cost burden across key discretionary categories such as automobiles, consumer electronics, healthcare, and apparel—making premium offerings more accessible to the urban middle class and younger cohorts.

    • The Union Budget’s new tax regime, which offers zero tax liability for annual incomes up to ₹12 lakh, has significantly enhanced disposable income, encouraging shifts toward higher-value consumption.

    • Monetary support from the RBI, including aggressive rate cuts and reductions in the Cash Reserve Ratio (CRR), has further bolstered liquidity and credit availability, providing additional tailwinds to consumer demand.
As a result, sectors like automobiles, premium housing, branded goods, retail, white goods, and digital services are witnessing strong momentum, transitioning from niche segments to mainstream growth drivers. 

This evolving consumption landscape presents compelling opportunities for businesses and investors alike, especially those aligned with aspirational and value-driven consumer trends.

2. Domestic-focused sectors like Defence and BFSI outperforming while IT lags. how do you assess the health of India’s IT sector?

Sectors such as defence and BFSI continue to demonstrate strong earnings visibility across both near- and long-term horizons, underpinning their relative outperformance. Defence is benefiting from sustained government spending and strategic indigenization, while BFSI is supported by robust credit growth, improving asset quality, and digital transformation.

In contrast, India’s IT sector is experiencing a cyclical pause rather than a structural decline. Global macroeconomic uncertainties have led to deferred discretionary tech spending, particularly in key export markets. While this has clouded near-term earnings visibility, the sector’s long-term fundamentals—driven by cloud adoption, AI integration, and digital transformation—remain intact.

What we’re witnessing is not a retreat, but a strategic pivot: a shift from traditional outsourcing models toward AI-led digital transformation.

3. How is LIC MF currently positioning its equity schemes in light of the recent market highs and global uncertainties?

Our investment strategy is centered around identifying sectors and themes that demonstrate the potential to consistently outpace nominal GDP growth. We prioritize businesses that benefit from long-term structural tailwinds, are led by high-quality management teams, maintain prudent balance sheets, and exhibit strong operating cash flow discipline

We are currently overweight on the following themes:

    • Power and Data Centre Capex: With India’s energy transition accelerating and digital infrastructure demand surging, we see significant opportunities in power generation, transmission, and data center buildouts. These sectors are supported by policy incentives, rising energy consumption, and the digitization of enterprise and consumer ecosystems.

    • Contract Manufacturing: The shift toward outsourcing and the China+1 strategy are driving growth in electronics, chemicals, pharmaceuticals, and auto components. Indian players with scale, compliance strength, and cost efficiency are well-positioned to capture global supply chain realignments.

    • Domestic Pharmaceuticals: We favour companies focused on domestic branded pharma, chronic therapies, hospitals, and wellness segments. The sector is supported by rising healthcare awareness, expanding insurance coverage, and a shift toward preventive care. 

    • Import Substitution: Sectors benefiting from localization trends—such as chemicals, electronics, defense, and capital goods—are gaining traction as India aims to reduce dependence on imports and build self-reliance. We look for players with scale, technology depth, and cost competitiveness.

    • Consumer Discretionary: Rising affluence, urbanization, and aspirational consumption are driving demand in categories like automobiles, apparel, travel, and lifestyle services. We favor businesses with strong brand equity, distribution reach, and digital engagement.

4. What are your top 3 sector picks for long-term investors looking to benefit from India’s structural growth story?

Over the next three years, we anticipate strong performance across sectors like consumer discretionary, private financials, domestic pharma, and manufacturing-driven by structural tailwinds, policy support, and evolving consumer behaviour.

    • Rising disposable incomes, aspirational spending, and urbanization trends are expected to fuel growth in categories such as automobiles, lifestyle retail, travel, and entertainment. The shift from essentials to experience-driven consumption will be a key theme.

    • With government infrastructure push, PLI schemes, and private sector revival, capex-intensive industries like power generation, power transmission, data centres, engineering, and industrials are poised for a multi-year upcycle. This will likely boost demand for capital goods, logistics, and allied services.

    • Well-capitalized private banks and NBFCs are set to benefit from credit growth, digital adoption, and improving asset quality. Their agility in product innovation and customer acquisition gives them an edge over public sector peers.

    • India’s pharma sector is evolving from a generics-led export model to a more diversified play including domestic formulations, contract research and manufacturing, and specialty drugs. 

The China+1 strategy, Make in India initiatives, and global supply chain realignment are creating tailwinds for domestic manufacturing. Sectors like electronics, chemicals, and auto components.

5. Primary market has seen record fundraising with a massive pipeline still ahead. Are we reaching a saturation point? What’s driving the IPO boom

India’s primary market has benefited significantly from robust domestic liquidity, driven by mutual funds, insurance companies, and a growing base of retail investors. At the same time, a wave of new-age sectors is making its way to the public markets—characterized by rapidly expanding total addressable markets (TAM) and improving profitability metrics.

Consumer tech firms, fintechs, and D2C brands are reaching operational scale and turning to IPOs to fuel their next phase of growth or offer exits to early backers. This trend is opening up fresh avenues for investors to diversify beyond traditional, mature sectors and tap into the evolving innovation economy.

We believe the market is far from saturation, provided liquidity remains robust and investors continue to access compelling, differentiated growth stories.

6. For you, what is the single biggest, underappreciated long-term opportunity for the Indian equity market over the next five years?

Import replacement is poised to be a defining theme for India over the next five years, even if it's not always recognized as "underappreciated." This strategic shift is being driven by a confluence of factors that make it both timely and transformative.

Drivers of Import Replacement Momentum

    • Robust Addressable Opportunity: India continues to rely heavily on imports across several critical sectors. This dependency presents a massive opportunity for domestic players to step in and capture market share, especially in areas where demand is growing rapidly.

    • Strong Government Support: Policy initiatives such as the Production Linked Incentive (PLI) schemes, Make in India, and Atmanirbhar Bharat are actively encouraging domestic manufacturing. These programs offer financial incentives, ease of doing business reforms, and infrastructure support to catalyze local production.

    • Corporate Willingness to Invest: Indian corporates are increasingly committing capital toward capacity expansion, R&D, and strategic technology tie-ups. This reflects a growing confidence in the long-term viability of domestic manufacturing and a desire to reduce exposure to global supply chain disruptions.

    • We see import replacement opportunities in sectors like defence, electronics, chemicals, APIs and engineering goods

This shift toward import replacement isn't just about economic self-sufficiency—it's about building strategic depth, creating jobs, and positioning India as a global manufacturing hub. If executed well, it could redefine the industrial landscape of the country.