Value seen in banking, IT and FMCG, be wary of defence: Rajat Sharma

Rajat Sharma, Founder and CEO of Sana Securities, shared a value-driven, selective investment outlook across banking, IT, defense and FMCG sectors, emphasizing long-term valuations and fundamentals over short-term momentum.On the banking and financial sector, Sharma said in an interview with ETNow that he believes the recent pullback in major private banks like HDFC Bank and ICICI Bank offers a good buying opportunity ahead of results. He noted that recent gains in the sector have been stock-specific, with mixed performance among lenders. HDFC Bank in particular stands out for its attractive valuations, strong franchise and favorable price-to-book figures. Sharma believes expectations are already subdued, and even slightly better-than-expected numbers could trigger a sharp recovery.

“I am optimistic that in this budget there would be some relief on the tax front, be it long-term taxes just to lure FIIs back to the country and HDFC Bank has traditionally been the favorite stock for FIIs, that is where they have had the highest allocation. So whichever way you look at it, it is very well positioned, both HDFC Bank and ICICI, financial sector is a sector that we want to add now,” he said.

On Reliance Industries, Sharma disclosed that he does not own or closely monitor the stock. He views Reliance as a market-focused conglomerate whose diversified businesses make it move largely in line with the indices, limiting its appeal from a targeted stock selection perspective.

Within IT, Sharma expressed his strong belief and described it as his preferred sector for long-term investments. He added to Infosys, citing its AI platforms Nia and Topaz, which enable large-scale adoption of AI among customers, especially in manufacturing and financial services. While IT valuations are not cheap compared to long-term averages, Sharma believes sentiment is turning positive and the sector is undervalued relative to its future potential. He also added Birlasoft, a midcap IT stock, highlighting its AI-driven training platform and potential for revaluation as revenue scales. Its investment horizon is five to seven years.

Sharma remains cautious on defense stocks despite discussions on raising the FII ceiling. He believes valuations are excessively high and believes any upside from policy changes would be temporary, followed by a cooldown.

“Many of these companies are trading at such extreme valuations that when I look at them, whatever kind of growth I see in them, over the next few years, yes, if the FII limit is raised, these stocks may have a knee-jerk reaction, rise 5-7%, but 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 gains. Sharma said valuations have corrected significantly, competitive pressure is easing due to VAT cuts, and major players like HUL and ITC could benefit from volume recovery and digital expansion. FMCG, he believes, offers compelling long-term value at current multiples.

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