He believes the market is entering a phase where earnings delivery and improving demand could create opportunities across select sectors.
Speaking from the sidelines of the Motilal Oswal Annual Global Investor Conference, Khandelwal walked through where he sees growth building over the next few quarters — and where he’d rather stay away.
On banks and NBFCs, Khandelwal doesn’t see much reason to bet big on large private banks right now. He argues NBFCs (non-banking financial companies) are better placed, since strong FCNR(B) inflows — deposits that non-resident Indians park in foreign currency accounts — have eased worries about funding costs.
He also thinks asset quality across the lending space is holding up well, which gives NBFCs room to keep growing faster than the big private banks. Motilal Oswal, he said, stays away from PSU banks as a matter of house strategy, even though he thinks credit growth and asset quality there look reasonably healthy too.
Indian IT is another sector he’s warming up to, though not for the reasons most people expect. Khandelwal says the conversation has moved past whether AI is a real opportunity — companies are now asking what actual return they’re getting on their AI spending. He compares this to two earlier tech cycles: the ERP rollout years ago, and the shift to cloud computing between 2015 and 2017.
In both cases, IT services firms eventually captured real revenue once the technology matured and enterprises figured out how to use it properly. He believes AI is heading the same way, and pointed out that several IT companies have already reported the share of revenue coming from AI-linked work this quarter.
“We are seeing now that there are more questions asked about the return on the AI investments, and that is where Indian IT will make a lot of difference. This quarter we have seen the largecap, midcap – the earning delivery is at least in line or better than the expectation. So, we are seeing that IT as a sector is now started to do better than the expectation.” he said.
So where is he putting money to work? Khandelwal splits his portfolio into two buckets. The first is newer, faster-growing businesses — fintechs and electronics manufacturing services (EMS) companies riding new-technology themes. The second is more traditional but still delivering strong numbers: pharma, auto and capital goods.
He’s tracking both closely, and his near-term focus is on whether channel inventory — the stock sitting with distributors and dealers — gets used up this quarter. If it does, he expects demand to hold up in the quarters ahead too, even with raw material costs rising.
For the entire discussion, watch the accompanying video
