Value seen in banks, IT and FMCG, be wary on defence: Rajat Sharma

Rajat Sharma, Founder and CEO of Sana Securities, shared a value-driven, selective investment outlook across banking, IT, defence and FMCG sectors, emphasising valuations and long-term fundamentals over near-term momentum.

On banking and financials, Sharma said in an interview with ETNow that he believes the recent pullback in large private banks such as HDFC Bank and ICICI Bank presents a good buying opportunity ahead of results. He noted that recent earnings in the sector have been stock-specific, with mixed performances across lenders. HDFC Bank, in particular, stands out due to its attractive valuations, strong franchise and favourable price-to-book metrics. Sharma feels that expectations are already subdued, and even marginally better-than-expected numbers could trigger a sharp rebound.

“I am optimistic that in this budget there would be some relief in terms of taxation whether it is long-term tax just to attract FIIs back into the country and HDFC Bank is the favourite stock for FIIs traditionally if you look at it, that is where they have had the highest allocation. So, no matter how you look at it, it is very-very well positioned, both HDFC Bank and ICICI, financials is a sector where we are looking to add right now,” he said.

On Reliance Industries, Sharma disclosed that he neither holds nor closely tracks the stock. He views Reliance as a market-aligned conglomerate whose diversified businesses make it move broadly in line with indices, limiting its appeal from a focused stock-picking perspective.

Within IT, Sharma expressed strong conviction and described it as his favourite sector for long-term investing. He has added to Infosys, citing its AI platforms Nia and Topaz, which are enabling large-scale AI adoption among clients, especially in manufacturing and financial services. While IT valuations are not cheap versus long-term averages, Sharma believes sentiment is turning positive and that the sector is undervalued relative to its future potential. He also added Birlasoft, a midcap IT stock, highlighting its AI-driven training platform and the potential for rerating as revenues scale. His investment horizon spans five to seven years.

Sharma remains cautious on defence stocks despite discussions around raising the FII cap. He finds valuations excessively stretched and believes any upside from policy changes would be temporary, followed by cooling-off.

“A lot of these companies are trading at such extreme valuations that when I look at them no matter what kind of growth I factor into them, for the next few years yes, if there is an increase in the FII cap these stocks might just show a knee-jerk reaction, go up 5-7%, but will eventually cool down and come down to… They have to be at the right price for someone to buy these,” he said.

He sees potential positive surprises from FMCG earnings. Sharma argues that valuations have corrected meaningfully, competition pressures are easing due to GST cuts, and large players like HUL and ITC could benefit from volume recovery and digital expansion. FMCG, in his view, offers compelling long-term value at current multiples.

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