Indian IT Stocks Are Not an AI Play, Says Agnam Advisors CEO, Urging Investors to Diversify

Prashant Mishra, founder and CEO of Agnam Advisors, has a blunt message for investors who have been buying Indian technology shares because artificial intelligence dominates market conversation: they may be buying something other than what they think. In a wide-ranging assessment of the markets, he said one of the most common misconceptions today is that holding Indian IT stocks automatically delivers exposure to the AI revolution. In his words, India has already missed the early AI bus.

His argument rests on where the value in AI is actually being created. Global winners, he says, control critical layers of the ecosystem: semiconductor designers, chip manufacturers, cloud infrastructure providers, data centre operators and developers of foundation models. Nvidia, Microsoft, Amazon, Alphabet and Meta benefit because they own essential pieces of that chain. Most large Indian IT companies, by contrast, remain services businesses, earning their revenue by helping clients build and manage technology systems rather than by owning AI infrastructure.

The gaps, as Mishra lists them, are specific. India has no listed companies manufacturing advanced semiconductors. It has no domestic equivalent of AWS, Azure or Google Cloud. And it has no publicly listed firms building globally competitive foundation models like those from leading US players. India is not absent from the story, he notes: thousands of Indian engineers work on chip design at the local centres of Qualcomm, AMD, Intel and Texas Instruments. But that talent, he cautions, does not automatically become an opportunity investors can buy on the exchanges. Within IT, he points to Persistent Systems, LTIMindtree, Mphasis and Tata Elxsi as companies trying to move into AI implementation, product engineering and higher-value consulting.

On foreign institutional investor selling, which has dominated market talk for months, Mishra urges calm. He attributes much of it to global factors: elevated US bond yields, a stronger dollar, geopolitical tensions and worries about global growth. India's relatively rich valuations have also made it a natural place to book profits. Meanwhile, he says, the structure of the market has changed. Domestic mutual funds, pension funds, insurers and retail investors putting money in through systematic investment plans now offset foreign flows. A decade ago, he says, sustained FII selling could cause sharp, prolonged declines; today domestic money provides a significant cushion. He suggests FII-led corrections can be treated as opportunities rather than reasons to panic.

On semiconductors, Mishra credits the India Semiconductor Mission with creating momentum around projects involving Micron Technology, Tata Electronics and Renesas Electronics. But he asks investors to separate chip design, packaging and advanced fabrication. India is already strong in design. Manufacturing is much earlier along, with most current projects centred on assembly, testing and packaging, which matter for jobs and supply-chain resilience but lack the technological barriers and margins of advanced fabrication. Taiwan, South Korea and the United States built their ecosystems over decades, he says, so expecting competitive advanced-node manufacturing in India within a few years would be unrealistic. His view is that India can become a significant player in assembly, testing, packaging and mature-node manufacturing over the next decade.

The thread running through his outlook is diversification. Too many investors, he argues, are piling into one idea, whether AI, defence, gold, small caps or US technology, and markets have a way of punishing concentrated bets. In equities he stays constructive on areas tied to India's domestic investment cycle: defence, power equipment, transmission infrastructure, industrial manufacturing and select renewable energy. He is more cautious on traditional IT services, some consumer-facing sectors and parts of banking where expectations may have outrun fundamentals. In debt, he favours high-quality corporate bonds, banking and PSU debt funds, short-to-medium duration strategies and target-maturity funds over aggressive long-duration bets. Gold, he says, belongs permanently in a portfolio at roughly 8 to 12 per cent, as financial insurance rather than a way to maximise returns.

He sees inflation as much improved over the past year, helped by lower food inflation, easing commodity prices and prudent monetary policy, but not beaten. Food prices remain exposed to weather and energy prices to geopolitics. His base case is inflation that stays manageable but settles closer to the RBI's comfort zone than the unusually low recent readings. He also says Indian investors cannot ignore Wall Street: US equities are supported by strong tech earnings and AI enthusiasm, but concentration, elevated valuations, competition from higher bond yields and America's fiscal position are risks. A US correction, he says, could hit foreign flows into India, strengthen the dollar, weaken the rupee and raise volatility. He therefore favours broad-based global funds over bets on a few expensive themes.

His closing point ties it together: the biggest risk today is not technology stocks, AI or even geopolitics, but concentration. The things to watch are whether Indian IT firms genuinely shift into AI implementation and whether India's chip projects move beyond assembly and packaging.