Indian IT stocks not yet bargain buys, says Bandhan AMC's Manish Gunwani

Manish Gunwani, Head – Equity at Bandhan AMC prefers manufacturing and export-oriented sectors over consumption, and believes investors can expect 6–7% real returns when markets trade at fair value. By Alpha Desk Manish Gunwani, Head – Equity at Bandhan AMC, said Indian IT stocks may not yet qualify as bargain buys despite recent corrections. The fund house manages assets worth ₹610.84 crore as of November 30, 2025. “I wouldn't be too contrarian here and say they are bargain buys. Obviously, valuations have corrected a lot, but we have to acknowledge that the impact of AI on coding effort is enormous,” he said. He noted that global peers such as Accenture and EPAM Systems appear cheaper compared to Indian IT services firms. Gunwani also flagged currency risks. He said the sector has benefited from rupee depreciation, but that tailwind may not continue. “My personal view is that there's not much left for the rupee to suffer. So that benefit, also for this sector, is kind of dissipating,” he said. Also Read | Chartist Rohit Srivastava's Nifty trading strategy as it slips below 20-day average Overall, he added, “You need to be very brave to own this sector at this point in time. I think it's a bit too early to jump in.” While industry leaders have argued that AI integration could create new demand, Gunwani said the situation is more complex than past tech cycles, such as Y2K or cloud migration. He pointed out three issues: AI directly impacts coding effort. Large IT firms employ lakhs of people, making retraining a major task. Global investors have alternative options overseas. On broader markets, Gunwani said India’s underperformance versus global and emerging markets may be nearing completion. However, he cautioned that classical global risk-off indicators such as credit spreads and volatility remain benign. If a global shock emerges, he said, “that pain, if it happens, is still left.” Gunwani expects earnings to improve in the fiscal year 2026-27 (FY27) compared to 2025-26 (FY26), supported by nominal gross domestic product (GDP) trends and currency effects. “Nominal GDP has bottomed out,” he said, adding that corporate earnings have a strong link with nominal growth. Also Read | Dipan Mehta on NCC fall, AI stock valuations and why he remains positive on CDMO He believes rupee depreciation supports sectors such as pharma, IT, refining and metals. In terms of market returns, he said, when markets are at fair value, investors can expect “6-7% real return, which is above inflation.” Gunwani said the bigger opportunity may lie in Indian manufacturing rather than consumption. “I think the Jack in the Box is Indian manufacturing more than consumption,” he said. He pointed to strong earnings momentum among global industrial companies such as Caterpillar and ArcelorMittal as evidence of a global capex cycle. He argued that currency dynamics could support India’s export competitiveness over the next few years. If AI disrupts IT services exports, India may need to pivot policy focus toward manufacturing. Gunwani said he prefers exporters over purely domestic manufacturers because of the larger addressable market. “In terms of exports, it starts right from slightly upstream things like steel to metal forming to auto ancillaries to chemicals… I think capital goods exports are something that looks interesting,” he said. Also Read | Fund managers raise largecap exposure, stay cautious on sector bets: Morningstar On concerns that a slowdown in IT hiring could affect retail loans and banking, Gunwani said it is “too early to worry.” He cited strong services trade data and steady growth in Global Capability Centres (GCCs). He also noted that AI-driven productivity gains could help moderate inflation and interest rates. “I don't think we should be very pessimistic looking at the negative effects of AI,” he said, adding that AI-led productivity may help keep rates lower. For the full interview, watch the accompanying video Catch all the latest updates from the stock market here (Edited by : alphadesk )