In a candid conversation with ET Now, Sabharwal warned that the entire IPO story is “becoming more and more murky,” citing a worrying pattern of companies suddenly turning profitable just ahead of their public issue. “Many of these companies are reporting profits only in the last quarter before they come for IPO, or the last year after being in losses for years,” he said. This trend, he added, raises serious questions about transparency and earnings quality.
According to Sabharwal, despite such red flags, these IPOs are being “lapped up” by large institutional investors, which in turn triggers a herd response from retail investors. The consequence, he noted, is an overheated primary market and a subdued secondary market. “Promoter selling and a huge flow of IPOs are keeping the broader markets subdued,” he said, even though earnings for the September quarter have been robust with overall growth of around 16%.
In a separate conversation last month, he added that despite the frenzy, he remains on the sidelines. “I have not, because see, once you get into that trap… then in the end you do not really know what you are doing,” he said, stressing that attractive opportunities may arise later when valuations are correct.
On the outlook for the coming quarters, Sabharwal struck an optimistic note on earnings recovery. He expects the profit pool to broaden from this quarter onwards, led by a revival in consumer demand. “The entire consumer space should see a strong revival. Auto companies should continue to do well,” he said, adding that large-cap names like Bharti Airtel, Reliance Industries, and major banks are well-positioned as margins stabilise.
While the domestic earnings picture looks healthy, Sabharwal cautioned that global factors could still influence the near-term trajectory. “Global markets have done very well; we have not done as well. So, if they go into a correction, we’ll have to see how much we correct,” he said.Also read: Lenskart, PhysicsWallah, and Groww: GMP trends suggest up to 22% listing gains for 9 IPOs next week
On public sector banks, Sabharwal remains constructive but selective. “PSU banks overall should do well, but people should focus on the larger ones,” he advised, highlighting State Bank of India as a standout. With the QIP fundraising behind it and interest returning to the stock, he sees a potential 15–20% upside in SBI as it continues its rerating cycle.
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