Falling crude, stable macros set stage for India’s next growth phase: Aditya Kondawar

India’s equity markets are heading into a crucial earnings season at a time when macroeconomic conditions have turned increasingly supportive. Brent crude has slipped below the $70-a-barrel mark, the rupee has stabilised, and foreign institutional investor (FII) selling has moderated. Yet, despite these favourable factors, the spotlight remains firmly on the information technology sector, where investor sentiment continues to be clouded by slowing growth and uncertainty around artificial intelligence (AI).

Speaking to ET Now, Aditya Kondawar from Complete Circle Consultants, said the IT sector has endured an extended period of valuation correction, driven by weak sentiment and conflicting narratives around AI.

“Like we have a chef’s special every week in a restaurant, we have a casualty every week in the IT sector. Unfortunately, the whole sector has gone through a very bad phase of derating, negative news, and a lot of positive and negative commentary coming out,” he said.

He noted that while some AI companies claim automation could significantly reduce human involvement, others are now acknowledging that such expectations may have been overly optimistic.

“On one end, we have a lot of AI companies saying that they can completely make processes obsolete and, on the other hand, we also have some AI companies saying that the initial presumptions that one AI model can actually replace five humans are completely false,” he said.

According to Kondawar, the increasing costs of computing power, memory chips, and energy are also changing the economics of AI deployment.
“In fact, we have heard from many leaders that AI is becoming more costly and costly as the power of compute, the cost of compute, the cost of memory chips, and the cost of power keeps going up,” he said.KPIT‘s Valuation Reflects Weak Sentiment
Kondawar believes the market may have already priced in much of the near-term weakness for automotive software major KPIT Technologies. He pointed out that KPIT’s valuation has compressed sharply from its long-term historical average despite only a modest decline in revenue guidance.

“KPIT’s seven-year, eight-year average PE is closer to 50 and today, the stock trades at a PE of 22,” he said.

While the company has guided for around a 1% decline in dollar revenue, Kondawar said investors should also consider the sharp depreciation of the rupee over the past year, which supports earnings in rupee terms. He expects earnings to improve significantly over the medium term.

“As per a few good brokerage estimates, KPIT can actually report a 50% jump in its net profit from the 600 crores that they did last year to almost 900 crores in the next two-three years,” he said.

Based on those projections, he believes the stock’s forward valuation appears considerably more attractive.

Growth Recovery Expected From Second Half of FY27
Kondawar cited brokerage estimates, including those from JPMorgan, which project KPIT’s profit after tax to reach around ₹920-930 crore by FY29. He explained that these forecasts assume the first half of FY27 remains challenging before business momentum gradually improves.

“The report basically presumes that growth will basically start coming back from H2 FY27,” he said.

He attributed the current weakness primarily to slower demand from two key automotive clients, BMW and Volkswagen, both of which have been facing operational challenges in Europe.

According to Kondawar, the expectation is that projects concluding at present will eventually be replaced by new programmes, supporting a recovery in growth over the coming years.

India’s Macro Picture Remains Supportive
Despite concerns surrounding IT earnings, Kondawar believes India’s broader macroeconomic environment has become considerably more favourable.

Lower crude oil prices, currency stability, improving debt inflows, and easing FII selling have created conditions that could support corporate earnings across sectors.

“When crude is below 70, all the stars align for India,” he said.

However, he stressed that the upcoming June quarter earnings season will ultimately determine whether companies are able to translate these macro tailwinds into stronger profitability after reporting robust results in the March quarter.

Auto and Consumer Themes Continue to Stand Out
Beyond IT, Kondawar remains constructive on India’s consumption story, particularly automobiles, auto ancillary companies, and agile consumer businesses.

He highlighted strong vehicle sales growth across leading manufacturers, including Mahindra & Mahindra and Maruti Suzuki, alongside robust guidance from component makers.

“Auto, auto ancillaries are the top of the pack for us in consumption,” he said.

He also pointed to structural improvements within India’s fast-moving consumer goods (FMCG) industry, where established companies are expanding into newer product categories while acquiring digital-first brands to remain competitive.

“The fact that a lot of legacy FMCG companies are now getting more agile,” he added.

Electric Vehicle Adoption Strengthens Long-Term Outlook
Kondawar also sees India’s automobile industry benefiting from a multi-year structural growth cycle driven by rising passenger vehicle demand and increasing electric vehicle (EV) penetration.

Passenger vehicle sales are expected to rise further this year, while EV adoption has accelerated steadily over the past few years.

“The penetration now stands at 7% as of June end and we may even end up reaching some 10% by the end of this year,” he said.

He believes these trends create opportunities across original equipment manufacturers (OEMs), component suppliers, and related industries, although stock selection remains critical.

Changing Consumer Behaviour Creates New Opportunities
Kondawar also highlighted organised retail as a long-term beneficiary of rising disposable incomes and increasing formalisation of consumption.

Using Trent’s value-fashion brand Zudio as an example, he said organised retailers are attracting millions of first-time shoppers entering malls across India.

He added that companies catering to this expanding consumer base are well positioned to benefit from India’s evolving consumption landscape.

A Structural Consumption Story
While acknowledging that investors need to remain selective, Kondawar believes India’s consumption-driven sectors continue to enjoy strong structural tailwinds even as the IT sector navigates a difficult transition.

“Right from clothing to your consumer staples to even automobiles trends are quite strong in India,” he said.

Summing up his long-term outlook, he added: “We used to say that sectors like automobile are tactical in nature but as we have seen over the past five, six, seven years they are quite secular in nature. This is a mega cycle of sorts.”