The broader market, according to Rajat Sharma, Founder & CEO, Sana Securities , has been characterised by a tight trading range, even as a few pockets have delivered steady gains. In an interview to ET Now, he said this imbalance is creating conditions for a rotation into underperforming sectors, with IT standing out as a strong candidate for a turnaround.
Sharma is particularly constructive on the IT sector and has recently added exposure to it. He attributes the sector’s weak performance largely to sentiment-driven concerns linked to developments in the US, including discussions around tariffs and repeated talk of higher H-1B visa fees. While these factors do not directly impact the services business, they have created a negative narrative around Indian IT companies.
Despite this, the fundamentals remain intact. Large IT companies such as Infosys and TCS derive a significant portion of their revenues from the US, with estimates ranging from 63% to over 80% for some players. Even revenues from other geographies are largely US dollar-denominated. As a result, currency movements play a crucial role in earnings performance. Sharma points out that IT stocks are currently trading close to their historical valuation lows, and any improvement in revenue growth could translate into meaningful upside.
A strengthening dollar adds another layer of support. Historically, periods of sharp dollar appreciation have been favourable for Indian IT companies, given that most of their earnings are in US currency. With valuations depressed on one side and currency tailwinds on the other, Sharma believes the risk-reward equation is becoming increasingly attractive. In his view, once global trade and tariff-related uncertainties begin to settle, the IT sector could see a sustained recovery. He sees merit in gradually building exposure across both large-cap and select small-cap IT stocks.
Within the sector, Sharma prefers a balanced approach. Among large caps, Infosys remains one of his preferred picks. The stock is currently trading at levels where its dividend yield has crossed 2.2%, offering downside comfort. He believes the company’s strong cash position provides flexibility for acquisitions and investments as it adapts to artificial intelligence-led changes in technology spending. Even a partial re-rating to historical multiples, he notes, could result in an immediate upside of around 20% from current levels.
Alongside established players, Sharma is also focusing on midcap IT companies that are building next-generation products. One such company is Intellect Design Arena, which he believes is attempting to redefine the core banking technology ecosystem. Traditional platforms like Finacle, widely used by banks, are based on older architectures that make integration of new-age artificial intelligence tools difficult. Intellect’s product, eMACH, aims to develop a modern, AI-ready core banking system that can capture and analyse customer data more efficiently and enable deeper insights for banks. While the stock trades at relatively higher valuations, Sharma does not consider multiples of 45–50 excessive for a technology company with strong growth potential. He believes that if the company continues to win large global orders — including recent deals with overseas banks — it could emerge as a significant beneficiary of the next phase of IT spending. His broader view is that Indian IT firms are well placed not just to adopt AI, but to build future-ready solutions by modelling and customising global technologies for enterprise clients.
Beyond IT, Sharma is also optimistic about select fintech and platform companies, particularly those with strong distribution reach. He notes that Paytm’s business profile has evolved, with the company re-integrating its payments ecosystem through multiple banking APIs. A growing share of its revenue now comes from third-party product sales, including credit cards and loan disbursements.
Sharma believes the future of financial services will be dominated by players with wide distribution networks, regardless of whether they are classified as banks, NBFCs or fintechs. On that basis, he remains positive on Paytm’s prospects, especially for investors with higher risk appetite. While he does not hold the stock personally, he has recommended it for select client portfolios and expects its revenues to continue rising sequentially as its distribution engine scales further. At current price levels, he sees Paytm as an attractive long-term bet within the evolving financial services landscape.
Overall, Sharma expects market leadership to broaden as valuations stabilise and earnings visibility improves. With IT stocks trading at subdued multiples, artificial intelligence driving a new investment cycle, and fintech platforms gaining operational traction, sectors that have lagged in recent years may find themselves back in favour as 2026 approaches.
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