Taneja said one of the main challenges for investors like Axis Capital is the high valuations of Indian IT companies, which have expanded significantly over the past three to five years and many now trade at a premium to their global counterparts. So Axis Capital prefers selectively investing in the Indian IT sector.
Global tech services companies, on the other hand, present a better risk-reward scenario with relatively lower valuations. They have also underperformed the market over the past year.
As demand for tech services picks up, these global firms are expected to benefit, making them a more attractive investment, he said.
Indian IT companies though are in a better position today under President Trump’s second term (Trump 2.0) than they were during his first term and things could be favourable for the Indian tech sector.
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Taneja also discussed the growing importance of generative artificial intelligence (AI) in the IT industry.
While generative AI has been a widely discussed topic for the past 24 months, Taneja is concerned if Indian IT companies can maintain productivity gains from this technology.
He believes that much of the benefit from generative AI will likely be passed on to customers, leading to lower prices or increased efficiency.
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