IT gains likely won’t surprise; management commentary in focus: Pankaj Pandey

The markets may be in a phase of consolidation, but select opportunities continue to emerge across sectors for investors who are willing to be discerning, Pankaj Pandey, head of research at ICICI Direct, told ET Now.In life insurance, Pandey noted that growth trends have been uneven throughout the year so far. “On the life insurance side, the first quarter of FY26 was quite weak, with growth of around 5.5%. However, if we look at April to November, the numbers for the sector have certainly improved to around 12-14%,” he said.

That said, margin pressure remains a concern. Pandey pointed out that distributor payouts are likely to be fully implemented by the fourth quarter, which could weigh on profitability in the second half. “Margins will come under pressure, which is why we are being very selective in this area. Our feeling is that FY27 will be a more normal year for the sector,” he added.Within insurance, Pandey favors companies that have focused on non-participating and unit-linked products. “HDFC Life is our preferred option, with a target price of around ₹860,” he said, while indicating there is little enthusiasm for pursuing broader sector exposure at this stage.

On the IT sector, ahead of TCS and HCL Tech headline earnings numbers, Pandey played down expectations of a big upside surprise. “Not much is expected in terms of results. Tier-I IT companies could see quarter-on-quarter growth of between 0.3% and 2.2%,” he said, adding that HCL Tech could be at the higher end of that range due to seasonality in its software products business.

He emphasized that management commentary will be more important than headlines. “What we will be watching closely is commentary on next year’s budgets, any signs of a revival in discretionary spending, and how Gen-AI for businesses scales,” Pandey said. Among IT stocks, his preference is LTIMindtree and KPIT, where growth visibility appears relatively stronger.

On the real estate front, Pandey has pushed back against fears of a broad slowdown, despite some companies reporting weaker numbers. “Real estate was the best performing sector in 2024, delivering returns of around 38%, while in 2025 it was among the worst performing sectors,” he said, adding that interest rates are at lifetime lows. “This is not the time to become negative about real estate, but you definitely have to be selective,” Pandey said. He highlighted Phoenix Mills as a preferred name, noting strong growth in consumption at malls and improved leasing activity in key assets in Mumbai. “Consumption in shopping centers is expected to grow by around 20%, and rentals have improved from around 67% to 77% in some locations,” he points out.

Addressing concerns around the discrepancy between pre-sales and revenue recognition in the sector, Pandey said execution timelines remain a challenge, especially on the residential side. “Some companies may miss their full-year pre-sales guidance, and residential construction could see a weak period,” he acknowledged.

However, he remains constructive towards players with a balanced mix of residential and commercial assets. “The commercial side remains robust. That’s why we like companies like DLF and Max Estates, where the commercial side makes a meaningful contribution to the overall performance,” Pandey said.

Overall, Pandey believes the recent correction has already priced in significant risk. “Most real estate companies are trading below their NAVs. Gradually we will turn positive on individual names, but we don’t expect any big fireworks this quarter,” he said.