Rajesh Iyer: Don't Panic About AI, Broad Markets Are Showing Strength

You know, sometimes the headlines can feel a bit all over the place, especially when it comes to the markets. But when someone like Rajesh Iyer, who heads Research & CIO at LGT Wealth India, speaks, it’s worth tuning in. He brings a wonderfully balanced perspective to the table, and right now, he's seeing some genuinely exciting shifts beneath the surface of the broader Indian markets – a far cry from the usual focus just on the big names.

One of the biggest takeaways from his recent insights is this palpable sense of earnings resurgence. It’s not just the usual suspects anymore; we're talking about a broader uplift. Think about it: sectors like manufacturing, capital goods, real estate, and even hospitality are really beginning to flex their muscles. This kind of widespread growth, I mean, it’s a healthy sign, suggesting the economic recovery isn't just concentrated at the very top, but is actually percolating through a wider array of businesses. It's definitely something to feel good about.

Now, let's tackle that elephant in the room – the whole AI 'panic,' especially concerning its impact on India's vast IT services sector. Iyer's take? It’s probably a bit overblown, at least for the immediate future. Sure, AI is going to be incredibly disruptive – no one's denying that – but the idea that it’ll suddenly decimate Indian IT companies overnight just doesn’t hold water. These companies, they're not standing still; they’re adapting, evolving, and actually integrating AI into their offerings. There might be some near-term pressures, yes, but the foundational demand for things like cloud transformation, digital solutions, and robust cybersecurity? That’s still incredibly strong and growing.

Looking ahead, say over the next three to five years, Iyer remains quite bullish on Indian equities. He envisions double-digit returns, which, let's be honest, sounds pretty appealing in any investor’s book. What's particularly interesting is his comfort with valuations in the mid and small-cap segments. While the large caps might feel a tad stretched in some areas, there’s a good deal more value to be found if you’re willing to look a little deeper. It’s not simply about being 'risk-on' or 'risk-off'; rather, it's about being incredibly selective and zeroing in on quality businesses that are poised for sustainable growth.

And what about the macro picture? Good news there too. It appears inflation is finally beginning to cool its heels, which is a welcome development. This shift should, in turn, give central banks the breathing room they need to pause those interest rate hikes, or perhaps even start contemplating cuts down the line. Such an environment is typically quite supportive for equity markets. For the everyday investor, particularly when some market segments appear pricey, Systematic Investment Plans (SIPs) continue to be a fantastic strategy. They allow you to steadily build your portfolio and benefit from rupee cost averaging – a sensible approach, wouldn’t you agree?

So, where should one be looking? Iyer points to several promising areas. Manufacturing and capital goods are definitely high on the list, reflecting that broader economic pickup we talked about. Infrastructure and industrials, too, look set for significant growth. And let’s not forget real estate and hospitality; they’re showing real momentum. Even in IT services, despite the AI noise, there are selective opportunities to be had. And financials? Well, they often form the backbone of a robust economy, making them a good long-term bet in his view. It’s about finding those underlying trends and positioning accordingly.

Of course, it’s never all sunshine and rainbows. Iyer is quick to acknowledge the potential headwinds. Geopolitical instability, a significant global slowdown that could impact exports, or interest rates staying 'higher for longer' than anticipated – these are all factors that could certainly throw a wrench in the works. But his overall message remains one of cautious optimism, grounded in fundamental analysis and a belief in India’s long-term growth story.