Market expert Sandip Sabharwal views India's IT sector as a tactical trading opportunity rather than a long-term structural uptrend, despite lower valuations. According to reports from The Economic Times, Sabharwal noted that the IT sector has been on a one-way downswing for almost a year and over the last three-four years it has gone nowhere. While valuations for TCS and Infosys have come down, presenting opportunities for value investors, he sees this more as a trading sector where 10-20% returns could be achieved but does not expect the trend to completely reverse. Sabharwal has taken small positions in large-cap IT names but intends to exit once they generate reasonable returns instead of holding them for the long term.
Marico's stronger-than-expected quarterly update has reinforced confidence in the consumption story, as reported by The Economic Times. Sabharwal highlighted healthy volume growth, improving rural demand, and a positive outlook as encouraging signs for the broader FMCG sector. He noted that the numbers were very strong and the outlook also seems quite positive, giving a positive connotation to the entire consumption space. His channel checks indicate consumer demand remained resilient during the first quarter, with expectations that this trend will be reflected in upcoming earnings from other consumer companies. Sabharwal added that packaging costs are already below pre-war levels, and those benefits will start coming in with prices largely holding and helping margins for the rest of the year.
Sabharwal remains constructive on the automobile sector after healthy sales across both conventional and electric vehicles, according to The Economic Times. He believes the ongoing shift toward EVs is accelerating replacement demand, with EV penetration touching new records. The momentum in electric two-wheelers is unlikely to slow, citing lower running costs and a faster replacement cycle. Sabharwal expects both vehicle manufacturers and component makers to benefit from improving industry conditions, with stable foreign fund flows potentially improving overall system liquidity. He noted that Tata Motors is always a work in progress, with some quarters being good then guidance disappointing the market, but domestically they seem to be stabilizing.
On the banking sector, Sabharwal emphasized that credit growth will eventually depend on the availability of deposits, as reported by The Economic Times. He noted that if liquidity does not improve, it will cap credit growth at some stage, though expected FCNR inflows could provide temporary support. Sabharwal added that stable foreign fund flows could also improve overall system liquidity, with the focus remaining on deposit growth keeping pace with credit expansion. He cautioned that while FCNR flows could bridge the gap this year, deposit growth has to keep pace with credit expansion requirements.
Sabharwal maintains positions in Maruti, M&M, Bajaj Auto, and Greaves Cotton, expecting all these companies to perform reasonably well, according to The Economic Times. He noted that this momentum will continue and the shift is not going to stop, with the EV market being huge and replacement demand could accelerate further. However, he continues to favour Titan over other jewellery companies due to governance concerns elsewhere, stating that for many jewellery companies, corporate governance remains a concern. Regarding Avenue Supermarts, while the retailer continues to deliver respectable operational performance, he believes the premium valuation remains difficult to justify, with limited upside expected due to very high valuations, as the performance is fine but the valuations do not justify the growth.
