Is it a good time to bottom fish in IT and banking stocks? Surjitt Singh explains

Surjitt Singh, Principal Officer & Fund Manager at PGIM India PMS, shares insights on whether it is an opportune time to bottom fish in IT and banking stocks. Singh notes that PGIM PMS remains underweight in both sectors. Despite a recent market recovery and stable earnings, banking faces challenges with slowing growth and potential pressure on net interest margins due to slower deposit growth compared to credit growth. For IT, the lack of visibility in revenue trajectories and discretionary spending, particularly in the US, adds uncertainty, keeping PGIM on the sidelines. \r

Singh emphasizes that current valuations are not appealing given the anticipated earnings profile for the next few years. Instead, PGIM is focusing on differentiated themes within the BFSI sector, and is positive on sectors like auto, healthcare, and building materials. Singh highlights the robust performance of grade A real estate developers and expects the next growth phase to benefit building materials. In healthcare, hospitals are seen as promising due to operating leverage and ongoing capex investments. Singh concludes that despite cutting exposure to industrials, these sectors offer more attractive investment opportunities given their potential for strong earnings growth.