Vora, Chief Investment Officer at Trust Mutual Fund, said the fund continues to have significant exposure to companies benefiting from the AI-led capital expenditure cycle, including power transmission companies, but plans to reduce some of its holdings.
“We still have a lot of it, but we’ll reduce a bit,” Vora said in an interview with CNBC-TV18.
Khemka, founder of WhiteOak Capital Group, said a sharp rally can cause an AI-linked stock to become a much larger part of a portfolio even without any fresh investment. An allocation that was initially 5%, for instance, could rise to 8-10% after a strong run-up, he said.
Investors can then trim the position back to around 5-6%, Khemka said, allowing them to reduce concentration while still holding more shares than they did before the rally.
Both investors remain positive about AI’s longer-term economic impact, but Khemka said it was harder to determine whether stock-market expectations had moved ahead of the underlying business reality.
Vora pointed to the growing dependence of US economic growth and financial markets on AI-related capital expenditure, particularly spending on data centres and energy infrastructure.
“If that at any point in time comes under question, the growth of AI and the demand for AI, then you can have the whole ecosystem, including the economy and the markets, under question,” Vora said.
Diversification can help absorb regulatory shocks
The investors also discussed the impact of regulatory changes on stocks, with Vora stressing the importance of diversification to manage such risks.
“As long as you diversify the portfolio, not over-concentrated, it’s fine. You can bear these kinds of shocks,” he said.
On the insurance sector, Vora said the direction of regulatory changes appeared aimed at making the industry more efficient and passing some of the benefits on to customers.
He compared the approach with changes in the mutual fund industry, where making investment products more affordable could help expand the market.
“The moot point is that if you make it more affordable, then the market should expand,” Vora said.
Khemka said regulatory action can hurt stocks sharply in the short term but could eventually support growth in the industry.
“The regulator here, I believe, has taken these actions to promote growth in the industry. Time will tell,” he said.
Capital-market businesses remain attractive
Both investors continue to see opportunities in capital-market businesses as household savings grow and become increasingly financialised.
Vora said his exposure includes exchanges, brokerages and wealth managers. Within exchanges, commodity exchanges are currently his biggest bet, given what he sees as multiple growth opportunities and relatively low penetration.
Khemka said exchanges can be attractive businesses because they generally operate as monopolies or duopolies and benefit from capital formation and rising trading activity.
He said he evaluates exchanges against the broader market using cash-flow multiples rather than relying primarily on price-to-earnings multiples. He is willing to pay a premium when an exchange has a defensible business model and is growing faster than the broader market in which it operates.
Healthcare and industrials among preferred sectors
Khemka said capital-market intermediaries and healthcare remain among the areas where he sees investment opportunities, along with selected industrial businesses.
“Healthcare is a segment where we always find a great number, a large number, of investable opportunities,” he said.
Vora said he remains positive on industrials, capital goods and construction, while identifying power transmission and defence as longer-term themes.
Despite muted performance across the broader market, Vora said opportunities for stock picking remain.
“India will continue to be a stock pickers’ market,” he said.