Value found in banks, IT and FMCG, be cautious in defense: Rajat Sharma

Rajat Sharma, founder and CEO of Sana Securities, shared a value-based, selective investment outlook across the banking, IT, defense and FMCG sectors, with an emphasis on valuation over near-term momentum and long-term fundamentals.

On banking and financials, Sharma said in an interview with ETNow that he believes the recent pullback in large private banks like 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 among lenders. HDFC Bank, in particular, stands out due to its attractive valuation, strong franchise and favorable price-to-book metrics. Sharma feels expectations have already been dampened, and even marginally better-than-expected numbers could trigger a sharp recovery.

“I am optimistic that there will be some relief in terms of taxation in this budget. It is just a long-term tax to attract FIIs back to the country and if you look at it, traditionally HDFC Bank has been a favorite stock for FIIs, where they have been allocated the most. So, how you look at it, it is in a very good position,” we rightly add HDCI Bank and now HDCI Bank, where we connect a financial sector. he said.

On Reliance Industries, Sharma disclosed that he neither owns nor tracks the stock closely. He sees Reliance as a market-aligned conglomerate, whose diversified businesses make it widely outperformed by indices, limiting its appeal from a focused stock-picking perspective.

Within IT, Sharma expressed strong conviction and called it his favorite sector for long-term investment. It added to Infosys, citing its AI platforms Nia and Topaz, which enable large-scale adoption of AI among consumers, particularly in manufacturing and financial services. While IT valuations are not cheap relative to long-term averages, Sharma believes sentiment is turning positive and the sector is undervalued relative to its future potential. It also added Birlasoft, a midcap IT stock, highlighting its AI-powered training platform and rerating potential as revenue scales. Their investment horizon ranges from five to seven years.

Sharma remains cautious on defense stocks despite talks of raising FII cap. He finds valuations overstretched and believes any bounce from policy changes will be temporary, followed by a cooling-off.

“Many of these companies are trading at such extreme valuations that when I look at them, no matter how much growth I factor in, yes, if the FII cap increases, these stocks may just show a knee-jerk reaction, go up 5-7%, but will eventually cool down and come down… They need to be bought at the right price,” he said.

He sees a potential positive surprise from FMCG earnings. Sharma argues that valuations have improved meaningfully, competitive pressure is easing due to GST cuts, and big players like HUL and ITC can benefit from volume recovery and digital expansion. FMCG, according to him, offers attractive long-term value at current multiples.

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