Rational Equity Partners

Why Iran's Hormuz toll proposal isn't bluster Hormuz carries 21 mb/d of oil and LNG Total bypass capacity: ~5–6 mb/d The remaining ~15 mb/d has nowhere to go That gap is the leverage

@VivekVRao1 Disclaimer for the math : The ratio of the # of days with NIFTY50 returns > 2.5% when VIX >=25 to the # when VIX < 25 should be adjusted by the relative frequencies of days with VIX >= 25 and VIX < 25 to get odds.

We ran @VivekVRao1's SPX/VIX study on NIFTY 50 When India VIX was ≥25 the prior day: NIFTY ≥ 2.5% happened 10.69% of days vs 0.63% otherwise → 16.9× more likely

Oil will make a killing comeback, brace for stagflation across the board 1.America is the world's largest oil exporter and is incentivised to keep prices elevated. American shale needs roughly $60-70/bbl to justify new drilling. A Trump administration that ran on "energy dominance" has zero motivation to crash the price of its most important export. 2.America is doubling LNG export by 2030 (invested heavily) - it needs to make returns on it.(Forcing Europe to buy (Europe signed a $750bn US energy contract. That dependency is now structural) maybe India too)+ New US LNG terminals lock in buyers for 20 years. 3.1.4 trillion dollar underinvestment in drilling/exploration in the last decade (IEA data). ESG pressure, energy transition narratives, and volatile prices gutted capex in new oil development. 4.$100 nominal isn't $100 real. After years of inflation in steel, labour, drilling services, and capital costs, the breakeven for new supply is structurally higher (Lower purchasing power of the dollar). 5.Iran's barrels are sanctioned, targeted, and largely offline (No resolution in sight, even a US Deal would mean 1-2 years of uncertainty around this). 6.Rebuilding bombed energy infrastructure (entire Middle East) takes years and a lot of money, hence demanding higher prices through deliberate supply cuts from OPEC, longer-term contract negotiations. 7. AI needs a lot of energy (10% of America’s demand in the next 2-3 years)- while the US government will try to protect the domestic consumer (through at-the-pump subsidies + mandating AI datacenter captive solar or PPAs with behind-the-meter gas players (example Bloom) - it will push demand for energy globally. 8.Shadow fleets are being seized, sanctioned, and denied insurance. Those grey market barrels are disappearing (Russia + Iran + Venezuela). 9.Nordstream (Russian gas pipeline to Europe) was destroyed (people conspire it was the US to force Europe to buy gas from the USA) - now at 47%+, Ukraine has attacked Russia’s major export ports with heavy damage (40-60% of Russia’s oil exports are out of the market in the last week) - Ukraine (US proxy) will continue to attack oil and export infra till a deal is reached. 10.IEA has pushed the peak oil demand timelines from the 2030s to the 2050s.

2,500 years. Same playbook. Every time. In the long run: alliances permanently rewired around whoever can guarantee your energy route.

Every chokepoint toll in history earned revenue for exactly as long as the bypass didn't exist Parthians: 400 years, then Rome found the sea route Danes: 428 years, then multilateral buyout Ottomans: 480 years, then WWI ended it Suez and Panama exist because they ARE the bypass

Why Iran's Hormuz toll proposal isn't bluster Hormuz carries 21 mb/d of oil and LNG Total bypass capacity: ~5–6 mb/d The remaining ~15 mb/d has nowhere to go That gap is the leverage

If this commentary is directionally right, we may be moving from 2023–25 → AI experimentation cycle 2026+ → AI rationalization cycle Less tool proliferation(maybe) More platform bets(definitely) More outcome-based contracts(can be +/- for rev) Different winners. 100%.

Tool fatigue increases the value of downstream services: integration, orchestration, vendor consolidation, data plumbing, workflow redesign. When DIY AI fails, enterprises outsource accountability. That could favour AI-Augmented IT players

Interesting commentary from a smallcap IT services earnings call Mgmt says enterprise clients are facing “AI tool fatigue” — they bought multiple AI/SaaS tools, ran pilots, expanded licenses… but outcomes haven’t materialized.

That’s why disruption is nonlinear. If AI-native tools reduce platform complexity and coding agents compress dev/integration work You don’t lose implementation revenue, you lose the wedge that unlocked the entire account. AI pressure travels: Models → Software → Services

Economics of the wedge: $1 of enterprise software license → $4–6 of downstream services But the real value is what follows Once inside, they grow wallet share far beyond the platform itself. Platform work = beachhead for multi-year revenue streams.

Everyone asks: Will AI disrupt enterprise software like ServiceNow/Salesforce? But there’s a second-order layer people ignore: Indian micro/small-cap IT services firms that derive 20–50% of revenue from these ecosystems. Their growth rides on platform license expansion.

Our conclusion is simple: Indian IT is not being disrupted evenly. The real opportunity lies below the mega-caps, where talent, productivity, and execution are already compounding.

The strongest companies share three traits: • Concrete AI deployments, not promises • Short-cycle, engineering-led delivery • Internal productivity gains before revenue re-rates This combination is rare — and extremely powerful.

India’s IT sector is saturated with AI narrative. But when we studied what companies are actually doing — talent, delivery models, productivity, and economics — a very different picture emerged. The next winners in Indian IT are not where most investors are looking 🧵👇