India's Top Deep Tech Stocks

In August 2023, Chandrayan-3 landed on the moon. ISRO's feat signified more than India's advancement in science and space technology.

It signalled to the world that India now has spirit of innovation, scientific talent and the desire to invest in technology that can change lives.

In recent years, India has led the way in people-centred innovation.

The success and reach of platforms like UPI and Aadhaar are compelling examples. They democratised access to technology for people who were traditionally outside those perimeters.

With advancements in artificial intelligence (AI) and large language models (LLM), India's indigenous tech sector is at an inflection point.

AI breakthroughs will profoundly augment how we work and live.

Undoubtedly, there will be a next massive shift in computing. The shift could be as momentous as the invention of the personal computer, internet, smart phones etc.

But the real game changer here could be Sovereign AI.

Sovereign AI refers to a nation's capabilities to produce artificial intelligence using its own infrastructure, data, workforce, and business networks.

Nvidia CEO Jensen Huang said that every country needs to have its own artificial intelligence infrastructure in order to take advantage of the economic potential while protecting its own culture.

The Indian government has approved Rs 103 bn (US$ 1.2 bn) funding package to bolster the nation's AI infrastructure.

The cornerstone of the effort is a planned supercomputer that will have at least 10,000 GPUs.

This could potentially help India develop homegrown app store, mapping services, search engines, spacetech, cloud storage systems etc.

Compared to leading deep tech geographies, India is still at a nascent stage of deep tech funding.

However, the ripple effects of path breaking policy moves, untapped market opportunities and world-class talent are setting the stage for exponential growth.

Over the last few decades, India has established itself as a dominant global player in IT services outsourcing.

Companies like TCS, Infosys and Wipro have driven this success by providing cost-effective software development, testing and business process management for enterprises across the world.

India's IT services industry now account for nearly 8% of the country's GDP.

This sets up India perfectly for the next phase of technology leadership - spearheading innovation in global deep tech entities.

Much like Indian IT services firms localised software development and disrupted the western-dominated landscape, Indian deep tech startups have an opportunity to pioneer the fourth wave by building innovative solutions harnessing technologies like AI, LLM, and more.

Yet Another Tech Bubble?

Global investors are increasingly of the opinion that yet another dotcom bubble is building up in the US.

For example, the number of sectors represented among the top 10 most valuable companies in the US is actually less diverse in 2024 than it was during the peak of the dotcom bubble.

In 2000, there were six sectors represented among the top 10 stocks, compared with just four today. What's more, during both 2000 and 2024, tech giants represented the biggest share of the index total market capitalisation.

In India, however, notwithstanding the debacle of few tech startup IPOs that crashed post listing (Paytm, Nykaa, Policybazaar), valuations of the tech sector have been reasonable.

So speculating on the possibility of a dotcom bubble in the Indian shores seem premature.

Investing in AI and Deep Tech Buzzwords and IPOs?

As an investor you ought to be careful about companies using the buzzwords of deeptech to their advantage without creating enough shareholder value.

ideaForge Technology, saw a stellar public listing in 2023, being the first IPO to be subscribed 100x since 2021. The company is a manufacturer of drones, unmanned aerial vehicles.

Since then, the company has shed a third of its listing price due to a weak quarterly earnings data and on profit booking.

A steady order book and demand for drones from the government, are seen as positives.

According to a Nasscom, there are over 3,000 deeptech startups in India growing at over 53% per annum over the last decade.

Deeptech startups account for a 12% share in the Indian startup ecosystem, a third of which are in the enterprise tech and the banking, financial services and insurance (BFSI) segment.India now also has its own policy for the deeptech ecosystem. Though the ecosystem is in a nascent stage, this is also the segment witnessing rapid growth among startups, which are using advanced technologies, including artificial intelligence (AI), machine learning (ML), Internet of Things (IoT), blockchain, Big Data, and robotics.

The bulk of these startups are looking to raise money by way of IPOs over next few years.

As investor you must evaluate these stocks not just on the basis of profitability but also the possibility of their frothy valuation.

Like Howard Marks wrote in his recent memo...

• One of the quotes I return to most frequently is Mark Twain's purported observation that "history doesn't repeat itself, but it often rhymes." For investors, cycles, along with their causes and effects, are among the influential matters that invariably rhyme from one period to the next.

Meanwhile here is the list of deeptech stocks that can be on your watchlist.

Warm regards,


Tanushree Banerjee
Editor, StockSelect
Equitymaster Research Private Limited (formerly Equitymaster Agora Research Private Limited) (Research Analyst)