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Narayanan Favors Value Stocks as AI Reshapes Markets
Chockalingam Narayanan is an investment expert at ICICI Prudential AMC.
He says investors should focus more on reasonably valued companies with dependable current profits.
Higher oil prices may help some companies, such as metal producers, while hurting businesses that use many inputs.
Because of this, investors need to choose stocks carefully.
He believes artificial intelligence could hurt some traditional IT services but also create new technology opportunities.
He does not think all IT stocks should automatically be bought as cheap bets.
Foreign investors have been selling India partly because other markets looked more attractive and because of currency and valuation issues.
Narayanan still believes India’s long-term economic story remains strong.
He prefers resilient smaller companies that could become larger industry leaders.
Chockalingam Narayanan prefers value over growth, current earnings over distant earnings, and asset-heavy businesses over asset-light ones.
Q1FY27 Nifty 500 earnings grew 12-13% year over year, but higher oil prices are creating winners and losers across sectors.
He says metals, cement, textiles, and auto ancillaries may offer selective opportunities based on business fundamentals.
Narayanan does not view IT stocks as outright contra bets, but wants more clarity on how their business models adapt to artificial intelligence.
He attributes foreign institutional investor selling mainly to asset allocation, currency, and relative valuations rather than rejection of India’s long-term growth story.
- Who
- Chockalingam Narayanan, Head Equities - PMS and AIF at ICICI Prudential AMC.
- What
- He outlined his investment preferences, views on sector opportunities, artificial intelligence, IT stocks, and foreign investor flows.
- Where
- In an interview with Mint; no interview location was specified.
- When
- In an interview discussing the current market environment and the next six months.
- Why
- He believes changing earnings growth, higher oil prices, AI-related uncertainty, and differences in valuations require more selective stock picking.
Cautious and selective view
Potential growth opportunities
Artificial intelligence and IT
Cautious and selective view
AI could increase automation, pressure pricing, reduce some companies’ terminal growth assumptions, and cause enterprises to delay discretionary technology spending.
Potential growth opportunities
AI may create a new technology investment cycle involving cloud migration, data engineering, cybersecurity, AI implementation, and platform modernisation; capable IT companies may benefit.
Foreign institutional investor selling
Cautious and selective view
India faced weaker earnings growth relative to some other markets and retained a valuation premium, creating a headwind for foreign investment.
Potential growth opportunities
India’s demographics, domestic demand, and broader growth trajectory remain strong; improving earnings and a moderating valuation premium could encourage FIIs to return.
Mid- and small-cap investing
Cautious and selective view
Elevated valuations and the strong re-rating of many stocks make a broad-based rally difficult to justify.
Potential growth opportunities
Selective opportunities remain among resilient industry leaders with economic moats, improving return ratios, and long-term growth potential.
Key facts
- Interviewee
- Chockalingam Narayanan, Head Equities - PMS and AIF at ICICI Prudential AMC
- Q1FY27 earnings
- Nifty 500 earnings growth was 12-13% year over year, according to Narayanan.
- Preferred investment style
- Value over growth, current earnings over distant earnings, and asset-heavy businesses over asset-light businesses.
- Potentially interesting areas
- Metals, cement, textiles, and auto ancillaries.
- IT view
- IT stocks are not outright contra bets, but their long-term outlook depends partly on how their business models adapt to AI.
- Foreign investor flows
- FII selling was attributed to asset allocation, currency, and relative valuation rather than rejection of India’s structural story.
- Smaller companies
- Preference is for resilient industry leaders with economic moats and potential to grow into larger businesses.
Sources
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