IT services: This script has played out before
The IT sector has been battered. Fears that artificial intelligence will render traditional IT services companies redundant have driven a sharp correction across market caps. But Tyagi is not running — he’s buying the argument, and the stocks.
“”The more we read about how the situation is panning out, the more we realise there is certainly much more hype and exaggeration than how it will eventually play out.””
His confidence stems from history. In 2004–05, when SAP and Oracle arrived as enterprise package software, the prevailing wisdom was that system integrators would become redundant. The opposite happened — ERP became the single largest practice for most Indian IT companies within five years. Then again in 2015–16, the rise of SaaS and Salesforce prompted the same doomsday chorus. Today, Indian IT companies are among the largest Salesforce implementation partners globally.
Tyagi acknowledges near-term revenue pressure is real and possible. But a total collapse in revenues? His answer is an unequivocal no. He points to the industry’s shift away from purely time-and-material billing toward outcome-based and fixed-contract models as evidence of structural resilience. More critically, he invokes a fundamental economic principle: when productivity rises, demand for that resource grows exponentially. Greater software adoption means greater need for system integrators who can orchestrate, contextualise, and integrate AI applications into enterprise architecture.
Quick commerce: Bet on the leader, ignore the noise
The listed quick commerce space has underperformed sharply, weighed down by hyper-competition and investor anxiety over margin pressure. Tyagi reads the situation as a classic platform-business cycle — messy in the short run, decisive in the long run.
He notes that the proof of concept pioneered by Blinkit (part of Eternal) has drawn aggressive responses from Flipkart and Amazon, both of which are pivoting their own customers toward faster delivery formats. Discounting wars and profitability headwinds are the inevitable consequence. But the tell-tale sign for Tyagi is that the category leader has stayed near breakeven despite the competitive onslaught — a signal that platform economics will ultimately concentrate value at the top. His verdict: be very selective about which player you back.
Q3 earnings: Turning the corner
Setting aside one-time adjustments from labour code changes, Tyagi sees genuine improvement in the aggregate earnings picture. Revenue growth and operating profit growth both moved higher in Q3, breaking out of the 5–8% range that had constrained the market for nearly six to seven quarters. He anticipates low double-digit growth by FY27, supported by the government’s push on consumption through direct tax cuts and GST rationalisation — effects already visible in auto and beginning to percolate into broader consumption sectors.
Banks: Margin of safety points to private sector
The PSU versus private bank debate is perhaps the sharpest call Tyagi makes. He credits PSU banks for their cleanup — bad loans are at a two-decade low across the system — but flags a critical flaw in the bull case: PSU banks are generating only around 1% ROA even at peak asset quality conditions. Private sector peers average between 1.7% and 2%.
The implication is structural. Banking is cyclical, and asset quality will eventually deteriorate. When that cycle turns, the thin ROA cushion at PSU banks leaves little room for error. Private sector banks, which have seen valuations compress significantly over four to five years without any operating deterioration, now offer what Tyagi calls a much higher “margin of safety.” His preference is clear: quality, at a discount.