While IT stocks may see a bounce from current levels after the recent correction, the sector’s overall outlook remains cautious, with any recovery unlikely to sustain for long, according to Sunil Singhania, Founder of Abakkus Asset Manager.
Speaking at the ET NOW Markets Summit 2026, Singhania said that although valuations in the sector have become more reasonable after the sharp correction, he remains unconvinced about the long-term growth prospects of pure-play IT services companies.
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“At this point in time, prices have fallen and there may be a bounce back. But our view is that it will be a bounce back at best, and therefore we are still not very constructive on pure-play IT services,” Singhania said.
Explaining his cautious stance, Singhania pointed out that the sector’s own growth guidance has remained modest. According to him, most Indian IT services companies have been projecting low-single-digit growth, limiting the scope for a strong earnings-driven rally.
He also flagged hiring trends as a key indicator of future business prospects. “Indian IT services companies themselves were guiding for 3–4% growth. So even if you believe they will achieve what they have guided, there was not too much upside left. More importantly, most of them were not hiring. If companies are not adding people, it becomes difficult to see strong revenue growth,” he said.
Singhania added that hiring activity remains an important industry metric, given that revenue growth in IT services has historically been closely linked to workforce expansion.
The veteran investor also noted that rapid adoption of artificial intelligence is adding uncertainty to traditional IT services business models.
He suggested that investors may find more compelling opportunities in other sectors where earnings visibility and valuation comfort are stronger. He remains constructive on private sector banks, pharmaceuticals, engineering companies, and capital market-linked businesses.
According to him, the broader market is in a much better position than a year ago, supported by improving corporate earnings, government policy measures, and easing geopolitical concerns.
Rather than making broad sectoral bets, Singhania advised a stock-specific approach, noting that some sectors may still face structural challenges despite short-term recoveries in share prices.
“As investors, as portfolio managers, we will have to balance between the two. But I agree India is a country of entrepreneurship. So many new stocks, so many new themes, so many new entrepreneurs are coming in, and obviously some of the new-age themes have also been doing well, along with strong mid- and small-cap results,” Singhania said.
“There are segments like niche manufacturing and engineering, which are necessarily smaller companies and have done very, very well. The outlook is also good. So, at some point in time you will have to be stock specific. But stock-specific does not mean only small companies,” he further said.
The veteran investor also highlighted that stock specifics can also be in large companies. “The best company is not always the best stock,” he said, adding that investors should focus on businesses with strong earnings visibility and attractive valuations rather than chasing short-term rebounds.
While IT stocks may recover from oversold levels in the near term, Singhania believes investors should temper expectations and view any rally as a relief bounce rather than the beginning of a new bull phase for the sector.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times.)
