UBS Says Indian IT Sell-Off Is Misread, AI Seen as Opportunity Not Threat

UBS Says Indian IT Sell-Off Is Misread, AI Seen as Opportunity Not Threat​

Indian IT stocks may be facing misplaced fears around artificial intelligence, according to UBS, which believes the recent correction in the sector is being misinterpreted by the market.

Hartmut Issel, Head of APAC Equities, Global Wealth Management and Chief Investment Officer at UBS, said artificial intelligence is unlikely to displace Indian IT services companies. Instead, he suggested that AI adoption could generate fresh demand, creating a potential entry point for investors after the recent decline in share prices.

AI Integration Challenges Could Benefit Indian IT Firms​

Issel noted that many companies experimenting with AI are discovering that implementation remains the real hurdle, not the technology itself.

He explained that while firms are testing AI tools, extracting meaningful benefits requires backend integration and systems alignment. Without proper integration, the full potential of AI cannot be realized.

This, he said, plays directly to the strengths of Indian IT services providers, which have long specialized in complex integration, digital transformation, and enterprise-level backend support.

Issel questioned whether new AI startups or US-based hyperscalers would take over this integration role, adding that such an outcome appears unlikely. Instead, he sees established IT services companies continuing to play a central role, as they have in previous technology cycles.

Partnerships Signal Continuity in Technology Cycles​

Issel highlighted emerging partnerships between AI developers and IT services firms as a natural evolution of past technology transitions. He pointed out that Indian IT companies have consistently played an enabling role in major digital shifts.

Given this context, UBS finds it difficult to believe that AI will sideline the sector. On the contrary, the bank views AI as an additional growth lever for service providers.

Valuation Comfort Returns After Correction​

Following the recent sell-off, UBS sees improving valuation comfort in Indian IT stocks.

Issel said that with prices having drifted lower, the sector now appears more rationally valued. He described the current phase as potentially a good time to accumulate select names.

UBS Positive on India and APAC Equities​

Beyond the IT sector, UBS remains constructive on equities globally, including India.

Within the Asia Pacific region, Issel said UBS sees upside in markets, including India, potentially in the mild double-digit range toward the end of the year.

Although India continues to trade at a premium compared to other markets, Issel noted that the valuation gap has narrowed. As other global markets have rallied, their valuations have caught up, leading to some moderation in India’s relative premium.