SynopsisNilesh Shah, MD and CEO of Envision Capital, is buying through market volatility but steering clear of IT, questioning the validity of current business models amidst AI's disruptive potential. He highlights six sectors poised for growth, including digital platforms, D2C brands, and defence hardware, while seeing AI as a tailwind for India, Inc. as an adopter, not a builder.ETMarkets.comNilesh Shah has been buying through the volatility. That much is clear. What is equally clear is what he has not been buying, and for a market that has spent months debating whether the IT selloff has gone too far, his answer is a cold splash of water."We still do not know if the current business models are valid or if they will have to be reoriented," said Shah, MD and CEO of Envision Capital, in a conversation with ET Now. For a sector where mid-tier valuations have compressed from 35x to around 24–25x and top-tier names have slid from 23–25x to 15–16x, that is not a small thing to say."The big question is not whether IT can grow from low single digits to high single digits. The question is whether the $100 of existing revenue becomes $80, or even lower, once AI displacement really kicks in, says Shah.No convincing answer for IT's AI challengeShah framed the AI challenge for Indian IT with unusual bluntness. Yes, AI creates new revenue pools, he put a hypothetical $20 on top of a $100 base, but the central unknown is how much of that $100 gets hollowed out first. Large IT firms carry enormous workforces, many of them early in their careers, and reorienting that machine is not a quarters-long exercise. It takes years, and nobody, including the companies themselves, has a convincing answer yet.On the currency tailwind argument, he was equally measured. A weaker rupee helps margins, sure. But you can also improve margins by simply not hiring, or by letting headcount shrink. That is not the kind of margin story markets eventually reward. What the market is really interrogating, Shah argued, is relevance, whether these companies can re-engineer themselves into something that matters in an AI-first world.You Might Also Like:So where has the money been going instead? Shah pointed to six pockets he has been actively building positions in through the recent correction.Nilesh Shah's 6 focus sectorsDigital platformsD2C consumer brandsEnergy securityDefence & indigenisationDrug discovery & healthcareDiscretionary consumptionOn defence specifically, Shah was precise about where the opportunity sits today, and where it does not. The play is in hardware: component manufacturers, subassembly makers, and companies edging toward system integration. The tailwinds are a rare double; domestic indigenisation push from the government and a global geopolitical environment that is structurally raising defence budgets everywhere. A software-led or AI-driven defence company, he said, would be compelling if one emerges credibly, but that story does not yet exist in India in any meaningful form.AI a tailwind for India, Inc.Outside of conventional IT services, AI is actually going to be a tailwind for corporate India, not a headwind. We are already seeing banks, NBFCs, and lenders adopt it for collections and customer experience, says Shah.You Might Also Like:That nuance matters. Shah is not anti-AI — far from it. His argument is that India will be a strong adopter, not a foundational builder, and that adopters have historically created enormous value too. The companies to watch are those using AI to expand markets, deepen customer relationships, and squeeze more productivity out of existing operations. That wave, he said, is already beginning to show up across sectors in early but visible ways.The broader message from Shah is one that long-term investors will find reassuring: the correction was real, the opportunity it created was real, and the macro and earnings backdrops have cooperated. But not every beaten-down sector deserves fresh capital just because it has fallen. Sometimes the price is lower for a reason that has not fully played out yet.You Might Also Like:Read More News on(What's moving Sensex and Nifty Track latest market news, stock tips, Budget 2025, Share Market on Budget 2025 and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .) Subscribe to ET Prime and read the Economic Times ePaper Online.and Sensex Today. 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