Data-centre boom exciting but risky; focus on green energy and select banks, says Sameer Dalal

Group 1: Data Centres and AI Boom - Data centres are considered the back office of the AI boom, but the sector involves heavy upfront capital expenditure (capex) and uncertain initial utilization, which can negatively impact profitability [1] - Replacing storage hardware is costly and frequent, leading to significant depreciation as a cash cost, distinguishing it from other infrastructure investments [1] Group 2: Market Valuation and Stock Picking - Indian markets have become complacent regarding high valuations, making selective stock picking crucial [2] - There is no sector-wide valuation comfort, but individual stocks within sectors may still present attractive opportunities [2] - The market is expected to remain range-bound with a mild negative bias due to foreign institutional investor (FII) selling, fresh equity supply, and modest earnings growth [2] Group 3: Investment Themes - A blend of growth and value investment strategies is recommended, indicating that this is not a market for index buying [5][7] - Strong opportunities are identified in green energy, particularly in local solar cell manufacturing, which is seen as a significant structural shift [6][9] - In the banking sector, select banks like Axis Bank, IndusInd Bank, and IDFC First Bank are highlighted for their growth visibility and reasonable valuations, with improved liquidity and managed deposit repricing [6][9]