IT and banking sector to lead next market rally: Rajat Sharma

In a recent interview with ET Now, Rajat Sharma, Founder & CEO, Sana Securities shared his outlook on sectors that could drive the next market rally, the emerging strength in consumption, and why he’s cautious about autos and mutual fund companies despite the broader optimism.

When asked which sectors could outperform over the next 12 to 18 months, Sharma was clear and confident.

“To my mind, if you have to ask me a couple of sectors which I am really positive on right now — one would be banking, with everything that the government is doing to open up the sector, and the other would be IT,” he said.

He explained that while Indian IT companies faced skepticism for not adapting quickly enough to artificial intelligence, the situation is changing rapidly.

“There was this view that Indian IT companies have not been able to embrace AI very well. That has changed under the surface. The companies that we are looking to invest in are now at the forefront of embracing AI and doing solid work for clients globally,” Sharma added.

According to him, IT and banking could be the two pillars leading the market over the next year and a half.

Rising Consumption and Logistics Demand
Commenting on the strong performance of Blue Dart, which posted nearly 30% year-on-year growth, Sharma noted that logistics firms are likely to benefit from a clear uptick in consumption.

“Consumption is going to be higher given what has happened with GST, and obviously, we have just come out of a festive season. These days nobody goes to a store, so logistical players like Blue Dart and Delhivery should see much more demand,” he said.

He added that while he hasn’t yet initiated positions in logistics stocks, the structural shift to online shopping could keep the sector buoyant for the next few quarters.

SEBI’s Consultation Paper: Not a Buying Signal Yet
The recent SEBI consultation paper on mutual fund fees triggered panic across capital markets, but Sharma believes investors should stay cautious.

“I would not necessarily think so. If you are talking about buying into some of these AMC companies, I would not think it will have any meaningful impact,” he said.

Instead, he expressed concern about tighter KYC norms, which could create hurdles for financial intermediaries.

“There are so many AMC companies getting listed, and a lot of them are trading at extreme valuations. I have looked at BSE, CDSL — many of these are extremely expensive right now. Any correction in the markets could take these down a bit,” he observed.

He also pointed to the massive rise in SIP inflows — from ₹1,000 crore to ₹28,000 crore per month in the past 15 years — warning that some cooling off is inevitable.

Auto Sector: EV Transition the Bigger Risk
On the auto sector, Sharma said that semiconductor shortages are no longer the main concern.

“A bigger risk for auto is not just supply-side disruption on semiconductors. That has played out two-three times already. The supply side has been addressed,” he explained.

He sees the shift to electric vehicles and intense competition as larger headwinds for the sector.

“The uncertainty now is around how fast companies like Mahindra & Mahindra and Tata Motors can adapt to EV migration. The only segment that has made a smooth transition so far is the two-wheeler space,” he said.

While he holds Tata Motors in his portfolio, Sharma clarified that he’s not adding more auto exposure for now.

“We are waiting for Tata commercial vehicles to get listed, but otherwise, I’m not holding any other auto stocks right now,” he added.

Outlook: Opportunities Amid Caution
Summing up his view, Sharma remains bullish on IT and banking, sectors he believes will gain from structural reforms and digital transformation. However, he’s wary of inflated valuations in financial services and uncertainties in autos.

His message to investors is clear — focus on sectors with earnings visibility and technological adaptability, rather than chasing overvalued names.