Marcellus Investment Managers is maintaining its preference for manufacturing-linked businesses over information technology stocks, despite the sharp rebound in IT valuations. According to Pramod Gubbi, co-founder and founding partner at Marcellus Investment Managers, the firm continues to avoid IT despite more attractive valuations due to structural uncertainties created by artificial intelligence development. As reported by NDTV Profit, Gubbi acknowledged that while there was a tactical angle for IT stocks due to cheaper valuations, the market still lacks visibility on long-term structural growth of IT services until AI reaches a more stable phase.
The Indian market is currently experiencing an improving earnings cycle, with corporate earnings appearing to have bottomed out after nearly two years of single-digit growth. However, macro risks continue to cloud the broader outlook, including elevated crude oil prices, rising global bond yields, geopolitical tensions and excess manufacturing capacity in China. According to Gubbi's assessment, the rapid pace of AI innovation makes it difficult for long-term investors to confidently assess how traditional IT services companies will evolve, keeping Marcellus on the sidelines despite improved valuations.
Instead of IT, Marcellus sees stronger opportunities in India's manufacturing ecosystem, with several structural tailwinds beginning to converge. As reported by NDTV Profit, these include a weaker rupee improving export competitiveness, the global China-plus-one sourcing strategy and the gradual implementation of India's free trade agreements. Gubbi believes these factors could benefit a broad set of manufacturing sectors over the next three years, including pharmaceuticals, chemicals, engineering goods, automobiles, auto ancillaries and textiles.
Beyond manufacturing, Gubbi highlighted financials as one of the few pockets where valuations remain attractive, while healthcare continues to offer a long-term structural growth opportunity despite relatively expensive valuations. According to the Marcellus co-founder, these sectors provide more stable investment opportunities compared to the uncertainty in the IT sector due to AI disruption.
