The question that investors ask is: Will 2026 be any better? Carnelian Asset Management & Advisors founder Vikas Khemani suggests that concerns around disruption led by AI are overstated. In an interaction with ET Now, the market veteran said he believes the IT sector has strong long-term potential. Every IT company will need to reorient itself, but that has been the case with every technology transition—whether it was Y2K, ERP, digitisation or cloud migration. “Each time, Indian IT services have expanded both in scope and in addressable market, and I believe this time is no different,” Khemani said.
From an enterprise perspective, implementing AI-related technologies will require the involvement of IT services companies—whether it is organising data, enabling systems, selecting tools or deploying those tools.
Order books across companies have been holding up well, and deal wins have remained strong. “That does not mean every IT company will perform equally well—each transition creates new leaders, and stock selection becomes critical. However, writing off the IT sector as a whole would be folly. We remain positive, continue to hold select stocks, and see IT services as a sector with good long-term potential,” Khemani added.
On FII outflows, Khemani expects that to improve as global conditions evolve. “DII flows have been very robust, driven by steady SIP inflows. As for FIIs, 2026 should be better as US interest rates start coming down and emerging markets attract flows again. The China–India rebalancing trade is largely behind us.”
He pointed out that the resilience shown by Indian markets despite persistent FII outflows is a positive signal. “If FII flows turn positive, the impact could be significant. Markets are not pricing that upside yet, and it could even lead to a rerating.”
Also read: Smallcap mutual funds tagged worst performers of 2025. Will 2026 change the picture?On whether investors should focus on market-cap allocation or stay stock-specific, Khemani said his approach has always been bottom-up. “If we see a sustainable 15–20% earnings growth over the next three to five years at a reasonable price, we are happy to buy and stay invested. Short-term underperformance does not bother us if the long-term story is intact.”
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