Devina Mehra: IT sector's underperformance phase likely over; shares view on AI boom

Devina Mehra, Founder and Chairperson-Managing Director of First Global, believes the artificial intelligence (AI) boom globally may be too narrow, driven by only a handful of companies, even as India's information technology (IT) sector appears to be coming out of its underperformance phase. Speaking to Business Today on Monday, Mehra said Indian IT companies have repeatedly adapted to technological shifts and are now doing the same with AI.

"It is not a sector we are heavily overweight, but we have never been as negative on the IT sector as some other fund managers have been. I am of the view that Indian IT companies have pivoted their business model many, many times. The IT managed to pivot. And as they're doing with AI also. My kind of bugbear with them is something different, but it's not to do with their existing business models, which is to do with the fact that in spite of so much cash and in spite of access to trained manpower, they did nothing on R&D," she said.

According to the market expert, while the fund is not overweight on IT, the worst phase for the sector may be behind. "IT, probably now the underperformance phase is over, I would hazard that guess," she noted.

She highlighted that First Global has maintained an overweight stance in sectors such as pharmaceuticals, healthcare and auto components. "So, I told you where we are overweight has been pharma, healthcare, auto components, we've added some more in auto. FMCG is also another sector where we are overweight," Mehra said.

On the financial sector, the market specialist said banking is looking better than usual, though it is not among the fund's overweight sectors. "Banking, we are not overweight but it's looking much better than it usually does," she added.

In contrast, Mehra said First Global has limited exposure to real estate, media and certain consumer durable sectors. "Where we do not have much exposure are things like real estate, media and things like that and even some of the durable sectors also we would not have much. Partly also it is a risk call, it is not that real estate never does well, the real estate companies, realty companies, but it is usually a volatile risky space where we are a little diffident about taking exposure," she explained.

On the ongoing AI-driven rally in global markets, the expert voiced caution. "I have concerns, especially if you look at the US market, the move has been so very narrow. It has been basically a tech and, within that, also a very small handful of companies which have been carrying this whole move," she said.

She added that investors often misread the trajectory of emerging technologies. "When it comes to new technology, people tend to think everyone must invest and chase that opportunity, but it often turns out to be a mirage. The real questions are how long the technology will take to succeed, who will emerge successful, and which specific company or technology will ultimately win," Mehra further stated.