Sabharwal noted that early earnings trends have been largely stable, with IT companies reporting results better than muted expectations and smaller financial firms delivering acceptable numbers. However, persistent foreign institutional investor (FII) outflows—nearly ₹4,000–5,000 crore in the previous session—are dominating market sentiment.
Tax changes, rupee weakness hit FII appetite
According to Sabharwal, recent tax changes combined with rupee depreciation have made India relatively less attractive for foreign investors. He added that concerns around tax claims—such as the case involving Flipkart—are unlikely to materially worsen the FPI outlook, as those rulings relate to operational entities rather than portfolio investors.
“Foreign capital is moving to markets that are delivering strong returns right now, such as Korea,” he said, adding that if India’s tax environment had turned more favourable, inflows could have improved at the margin.
IT stocks stable, limited upside
On the IT sector, Sabharwal said low expectations have helped stocks react positively to earnings beats, citing movements in Infosys and TCS. However, he does not expect meaningful upside for large IT firms.
“These are steady, low-risk businesses now. On market declines, they can offer 10–15% returns over time, but not much more,” he said, adding that industry growth is gradually improving from a no-growth phase to a 4–5% trajectory.
Real estate looks attractive after correction
Sabharwal believes real estate stocks are offering value after sharp corrections from recent highs. Despite concerns around job losses and slower sales, lower interest rates and stable rental income are supporting the sector.“Larger real estate companies with strong rental portfolios, especially those near 52-week lows, look attractive at current levels,” he said.
Cautious on Jio Financial, selective on internet stocks
On Jio Financial Services, Sabharwal remained cautious, pointing out that most of its valuation is driven by treasury assets rather than operating scale. While lending growth appears strong quarter-on-quarter, he said this is largely due to a low base and that valuations remain stretched.
Commenting on select internet companies trading near lows, he said long-term investors may find value, but near-term visibility on earnings recovery remains limited.
Prefer annuity plays over broking stocks
Sabharwal highlighted that asset management companies and annuity-style capital market businesses are better placed than brokerage firms, which remain dependent on market volumes.
“AMC earnings have been strong, AUM growth is steady, and valuations have corrected—making annuity plays more attractive than transactional ones,” he said.
Private banks still preferred over PSU banks
Despite strong recent results from PSU banks, Sabharwal said his long-term preference remains firmly with private sector banks. He flagged deposit mobilisation as a structural challenge for PSU banks, especially among younger customers.
“The only PSU bank we own is State Bank of India, as it continues to defend its deposit market share,” he said.
Metals rally carries risk; Reliance looks reasonable
While remaining positive on metals in the near term, Sabharwal warned that commodity prices appear parabolic and could see sharp corrections. Investors entering metal stocks late in the cycle should be cautious, he added.
On Reliance Industries, he said the stock looks reasonable after a near 10% correction, with strength expected in the refining and telecom businesses, even as retail performance remains under scrutiny.