ET Now asked about the recent IT stock rally: “We saw this run up in IT stocks. Do you think that the stocks are undervalued at this level?”
Sabharwal replied: “The IT sector has been an underperformer and often plays as an anti-AI trade. The good part is these companies are cash-generating and dividend-paying. The bad part is there is no visible pickup in growth across most companies. I think rallies will be more trading-driven or deliver modest returns until we see a real growth pickup.”
Turning to the financial sector, ET Now inquired about banks, given recent market strength.
Sabharwal said: “A year ago, NBFCs were better positioned than banks during the rate cut cycle. Now, with credit demand picking up and lower rates, large private banks like ICICI, Axis, and HDFC should do well. PSU banks like SBI should also perform, and NBFCs remain a solid play.”
On AI opportunities in India, Sabharwal noted: “AI-led demand has many components. Data centres are being set up, but it’s capital intensive, and ROI is unclear. Few companies are direct plays now, but it will take time for AI to impact India significantly.” Regarding NBFC investments, he emphasized caution: “You have to stick to top-tier NBFCs because asset quality norms and promoter integrity matter. Large corporate-funded NBFCs are safer and less likely to face governance issues.” With IT awaiting growth revival, banks benefiting from stable rates, and AI plays gradually emerging, investors are advised to stay selective and cautious in their portfolio positioning.
