Deep Tech Stocks to Leverage India's Economic Inflection Point

Can you imagine life without the internet, telecommunication, or ecommerce?

Can businesses afford to be exposed to hackers, deprived of digital and banking tools and without logistics and automation?

Can the country stay secure without defence and space technologies? Or progress without energy, education and health technologies?

The reply to these questions cannot be 'No' without deep tech.

Deep technology involves groundbreaking innovations in science and engineering, requiring years of extensive research and development to form entirely products.

Why is it relevant to as an investor?

Well, because the fear that without indigenous deep tech and home-grown tech products, India could be the victim of potential cold wars, is not unfounded.

Cold Wars in future could possibly be digital in nature with technological innovations having massive impact on geopolitical, economic and human life.

Artificial intelligence (AI), for instance, feeds on information, and its most powerful use cases could emerge through its applications across government, public and private sectors.

Dawn of Deep Tech Ecosystem

The Deep Tech ecosystem in India dawned with the necessity to align critical resources with India's own growth prospects.

Plus ensuring environmental, economic and geopolitical security warranted focus on indigenous technologies like never before.

Also, the vibrant ecosystem of tech startups and ready pool of STEM qualified workforce have been India's added advantage.

# Cold war in Vaccines, Semiconductor chips, Geospatial Maps and Rare Earth Minerals

Covid-19 brought to the fore the challenges that any economy could face in the event of being technologically cut off from the rest of the world.

Economies that lacked vaccine making technology or capacity were left gasping for life in 2020.

Acute shortage of semiconductor chips brought global electronics and auto manufacturing hubs to a grinding halt.

The Russia -Ukraine war brought the need for geospatial maps, surveillance tools like drones and access to rare earth minerals for critical warheads to government's priority list.

China's aggressive stance to get hold of Taiwan's semiconductor capacities or India's mineral deposits at the northern borders for EV batteries, is proof of the geopolitical urgency.

# Climate Imperative

Green energy, electric mobility and such other efforts to decarbonise the economy to fight climate change needs innovative technology inputs. Thus, Deep Tech has an important role to play in climate imperative projects of the government.

# Healthcare Necessity

To address the need to low-cost, easily accessible healthcare facilities for an incrementally ageing population, healthcare policies and government initiatives have warranted investment in Deep Tech.

# Trend in Corporate Capex

Indian companies, across sectors, have made technology-led investments a crucial goalpost.

Our research on individual stocks and takeaways from management concalls tells us that not just leading bluechips, but even midcap and smallcap companies are joining the Deep Tech fray.

To stay ahead of competition and to prevent their businesses from getting disrupted, companies are directing a chunk of capex to Deep Tech integration.

10 Key Deep Tech Trends Up to 2030

The key Deep Tech influences in this decade could be from technologies related to:

• Artificial Intelligence
• Machine Learning
• Robotics
• Quantum Computing
• Blockchain
• Biotechnology
• Lifesciences
• Language Processing
• Photonics and Electronics
• Vision

Each of these technologies could find massive and multi-pronged use cases across various industries.

For instance, a paint manufacturer could be using AI, robotics, blockchain and language processing at the same time.

Similarly, a defence manufacturing company could be using quantum computing, AI, photonics.

Or a diagnostics company could be offering services with biotech, life sciences and AI.

Deep Tech in Investing?

If India doesn't play its deep-tech cards right, this part of the world could become a stomping ground for superpowers.

India could end up as a place these superpowers go to test new technologies, acquire cheap manufacturing capabilities, all while sharing none of the core know-how.

So, keeping the urgency and necessity of Deep Tech ecosystem in mind. there are basically three ways in which investors should consider tapping into the Deep Tech megatrend....

1. Over the past decade, innovations in military and defence industry had a massive impact on civilian innovation. Cases in point are the global positioning system (GPS) and even the internet, born as ARPANET during the World War.
   
   Even today technology transfers from entities like ISRO and DRDO are playing a critical role in India's Deep Tech startups. Such tech tie-ups are critical cues for Deep Tech investing opportunities.
2. Deep Tech could accelerate the transition away from fossil fuels to renewable energy. So, energy related tech entities could fetch global investor interest.
3. Deep Tech is no longer the primary purview of deep pockets or of the scientific community. To be sure, big companies, universities, and governments are still major players.
   
   But Deep Tech R&D is now just as likely to be driven by a team of visionaries with a radical idea for innovation. So, it is not just the large well-funded entities but also smaller companies in India that could have a massive leverage with Deep Tech.

You can begin your journey to know more on India's potential Deep Tech stocks here.

Stay tuned to this space as we cover more articles on deep tech stocks in the coming days.

Happy Investing!

Investment in securities market are subject to market risks. Read all the related documents carefully before investing


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Tanushree Banerjee (Research Analyst), is the editor of Stock Select and Forever Stocks. Tanushree started her career at Equitymaster covering the banking and financial sector stocks and scrutinising RBI policies. Over the last decade, she developed Equitymaster's research processes that helped us pick out various multibaggers, across all sectors. A firm believer of "safety first" when it comes to investing, Tanushree closely follows the investing philosophies of Warren Buffett, Jeremy Grantham, and Joel Greenblatt.

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