Whalesbook
Sana Securities CEO Predicts IT and FMCG Turnaround in 2026
Rajat Sharma, the Founder and CEO of Sana Securities, has shared a forward-looking outlook suggesting a potential turnaround for key Indian sectors, particularly Information Technology (IT) and Fast-Moving Consumer Goods (FMCG), as the nation approaches 2026. While Public Sector Undertaking (PSU) banks and financial services have recently dominated market gains, Sharma anticipates a shift in momentum, presenting new opportunities for investors.
His positive stance is underpinned by attractive valuations and favourable currency movements, especially for the IT sector, which has faced headwinds from concerns over US tariffs and potential H-1B visa fee hikes. Sharma believes these issues do not fundamentally detract from the long-term prospects of Indian IT services.
The Core Issue: Re-evaluating IT Valuations
Sharma’s optimism for the IT sector stems from what he describes as significantly low valuations for major players. Companies like Infosys Limited and Tata Consultancy Services Limited are trading near historic lows, making them compelling targets for potential re-rating. A substantial portion of their revenue, ranging from 63 per cent to 83 per cent, is derived from the United States, with earnings predominantly denominated in dollars. This exposure means a strengthening dollar could provide a significant boost to their reported earnings.
While sentiment has been dampened by geopolitical trade tensions and immigration policy discussions, Sharma emphasizes that the core services offered by Indian IT firms remain in demand. He suggests that any recovery in revenue growth could trigger a sharp upward revision in stock prices.
Financial Implications: A Strategic Approach
Within the IT sector, Sharma advocates for a "barbell approach," combining established large-cap companies with select mid-cap firms focused on emerging technologies. Infosys is highlighted for its robust cash reserves, attractive dividend yield, and strategic investments in artificial intelligence (AI) through acquisitions, positioning it well for future adaptation.
On the mid-cap front, Intellect Design Arena Limited is noted for its development of an AI-ready core banking platform. This innovative solution is designed to replace outdated legacy systems commonly used by banks, representing a significant market opportunity.
Sharma also maintains a positive outlook on fintech, specifically mentioning Paytm for investors with a higher risk tolerance. He points to Paytm’s growing revenue streams from distributing third-party financial products, such as credit cards and loan disbursements. The company’s extensive distribution network is seen as a critical asset in an increasingly platform-centric financial services landscape.
Future Outlook: Consumption and Beyond
Turning his attention to consumption, Sharma observes that FMCG stocks have experienced a period of underperformance over the past few years. However, he anticipates an improvement driven by easing price pressures and the clearer visibility of the impact from Goods and Services Tax (GST) reforms. Consequently, he has increased allocations to consumer staples giant Hindustan Unilever Limited and paint manufacturer Asian Paints Limited. He specifically notes Asian Paints' ability to maintain its market share despite escalating competition.
Positive sentiment also extends to Tata Capital, which Sharma believes is currently undervalued by the market. He cites the potential benefits of group synergies and the steady expansion of new financial services businesses over time as drivers for future growth.
Regarding defence stocks, Sharma acknowledges the strong execution capabilities of companies in this sector. However, he expresses caution regarding current valuations, suggesting they have risen sharply and may not justify further capital deployment at this juncture, despite the sector's long-term attractiveness.
Impact
This analysis from Sana Securities CEO Rajat Sharma presents potential investment themes for the Indian stock market heading into 2026. Investors may find opportunities in the IT sector through large-cap resilience and mid-cap innovation, and in the FMCG sector as consumer spending potentially recovers. Positive signals for specific fintech and financial services entities could also influence portfolio strategies. However, the advice on defence stocks suggests prudence regarding current high valuations.
Impact Rating: 7/10
Difficult Terms Explained
- PSU Banks: Banks where the majority stake is owned by the Government of India.
- FMCG: Fast-Moving Consumer Goods; everyday items like food, beverages, and toiletries.
- Valuations: The process of determining the current worth of an asset or company.
- Currency tailwinds: Favourable currency exchange rate movements that increase the value of earnings.
- H-1B visa: A non-immigrant visa in the US for specialized occupations requiring theoretical or technical expertise.
- Barbell approach: An investment strategy that involves holding both very safe and very risky assets, avoiding the middle ground.
- Core banking platform: The foundational software systems that manage a bank's core operations and transactions.
- Fintech: Financial Technology; companies using technology to offer financial services in innovative ways.
- Third-party product distribution: Selling financial products offered by other companies, rather than the company's own.
- GST: Goods and Services Tax, an indirect consumption tax levied in India.
- Group synergies: The combined effect achieved when different business units within the same corporate group cooperate, producing greater results than the sum of their individual efforts.
- Defence stocks: Stocks of companies involved in the manufacturing and supply of military equipment and services.