It is good to be with the traditional IT cos as they are adopting to AI and new ideas: Vinit Sambre

Vinit Sambre, Head – Equities, DSP Mutual Fund, says “IT is a decent sector to be in considering the cash flow generation, the dividend payouts and the long opportunity which these companies will target. It is good to be with the traditional guys, because all these companies have started talking of the generative AI space and the requirement that most of the customers now want to adopt that into whatever softwares they are working on. So that is going to be an important space which is going to grow.”

A bout of short covering has come in IT. Now, specifically on IT, there is midcap IT, there is largecap IT and there are these niche companies like Rate Gain, MapMyIndia. Some niche players have in a sense been created and hopefully more will get created as the economy and IPO market evolves. What looks interesting as a medium term theme and long term idea?
Vinit Sambre: IT has been a bit complex, in a way. We are equal to underweight across most funds, we are not overweight in any way. And the whole stance was that as the world goes through a slow period, IT will also sort of reflect that. In terms of business momentum, maybe it is reflecting but not in terms of the price momentum because people are looking forward, looking ahead as the interest rates globally, let us say, cools off it gives some kind of push to the economy.

That is what maybe people are pricing in. So from that perspective, IT remains a decent sector to be in considering the cash flow generation, the dividend payouts and the long opportunity which these companies will target. My judgment would be that it is good to be with the traditional guys, because what is happening, I am hearing the commentaries coming out from these companies.


All of these companies have started talking of the generative AI space and the requirement that most of the customers are now wanting to adopt that into whatever softwares they are working on. So that is going to be an important space which is going to grow and I do not think our companies are going to lag behind is what it seems like today while it is too early to comment and I am not an expert, but I feel that these are the areas which will give decent business momentum to the traditional guys.

Like you said, there is definitely merit in looking at some of the new age companies. It is a new technology or something like that. But the young generation is more adaptive to some of these new areas. Wherever the companies are really making sense from their economic perspective we are open to look at that. It’s not that we have made huge investments in this space. But we are open, we are looking at some names and if something falls within our framework, we will definitely look at those.

Let us draw your attention to PSUs in general, real rerating or just a rising tide phenomenon? Is it a change of wind or is it hot air?
Vinit Sambre: In fact, we will be shortly coming out with our annual note wherein we have covered some of the data points on PSUs. Overall, for us also, the PSU exposure gradually has gone up this year. And this is again, backed by data which has changed. So when you break the PSU basket down into PSU banks, defence companies, energy companies, power companies, utilities and let us say the logistics businesses, in most cases, we observed that not only the have the growth rates inflected in a few cases, but also qualitatively, the ROCs, ROEs have improved quite significantly.

Those are the points which we felt should not be ignored, given that they are in a stage where the order momentum is improving and the balance sheet quality is also getting better and not that they are as expensive as the other parts of the market. We have been selective, although not as a basket approach, we are not buying everything, but wherever we feel it makes sense, in terms of framework or matrix, we have taken increased exposure across these buckets.

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