Devarsh Vakil, Head of Prime Research, HDFC Securities, points out that the Indian stock market is steadily recovering, buoyed by resilient corporate earnings. “Optimism around trade deals with the US and EU is easing FPI outflows, boosting investor sentiment,” he says. In an interview with Mint, Vakil discussed current market trends, his views on the IT sector, and sectors he is positive about. Edited excerpts:
Why is the market not able to see a sustained rally?
Indian equity markets are steadily recovering from the lows hit on February 2, 2026, buoyed by resilient corporate earnings. Q4 FY26 results have surprised positively, with the pharma and consumer sectors posting double-digit growth amid cost efficiencies.
FY27 guidance points to sustained momentum, driven by a capex revival and a pickup in rural demand. Optimism around trade deals with the US and EU is easing FPI outflows, boosting investor sentiment. Markets have reclaimed key supports, signalling a broader base for upside as global macros stabilise.
Why is strong economic data not automatically bullish for equities?
Strong economic data often feeds into corporate earnings with a lag, meaning the market may have already priced in the good news long before it materialises.
If robust growth is widely anticipated and fully discounted in valuations, there is little incremental upside left for investors. Strong data can signal an overheating economy, stoking inflation expectations and eroding the real value of future returns.
Ultimately, equity returns are driven not by what is good, but by what is better than expected — and in a priced-to-perfection market, even strong fundamentals can disappoint.
What are your views on the IT sector?
Indian IT services stocks have plummeted despite robust fundamental demand, presenting a compelling investment case. The Nifty IT index has declined 10-13% year-to-date in 2026, and the sector has shed over ₹1.56 lakh crore in market value recently.
Rising TAM
The overall IT spending in India is surging, projected to reach $176.3 billion in 2026, up 10.6% from 2025, outpacing global growth at 9.8%. IT services are forecast to grow 11.1% in 2026, driven by data centres (20.5% surge), AI software, and digital transformation, signalling an expanding addressable market amid enterprise investments.
Balance sheet strength
Indian IT firms boast fortress-like balance sheets, with India Inc. (excluding BFSI, oil & gas) holding record ₹10.67 lakh crore in cash by FY25 end, up 15% YoY. Tech giants like TCS, Infosys, and HCL maintain strong cash reserves to weather visa costs or slowdowns.
Budget boost for buybacks
Union Budget 2026 revamps buyback taxation to a capital gains regime (12.5% long-term for individuals versus prior 30% slabs), effective April 2026, easing the burden for minority shareholders while curbing promoter arbitrage. This provides a floor for valuations, enabling cash-rich firms to repurchase shares opportunistically at depressed prices.
How should investors navigate volatility? What sectors should one buy?
Asset allocation is key to financial success: diversify across asset classes and rebalance your portfolio regularly to manage risk.
The asset allocation plan must incorporate an individual’s risk appetite and return expectations. Stay focused on long-term financial goals amid short-term market swings. Systematic investment plans –SIPs- are the best method to invest.
Rupee -cost averaging by investing fixed amounts consistently, buying more shares when prices dip. Avoid emotional reactions, such as panic selling and euphoric purchases.
Sectors to focus on in 2026
Mass consumption revival: Supported by a strong agricultural cycle, low food inflation, and easier financial conditions.
Domestic self-sufficiency: Continued heavy investment in strategically important sectors like defence indigenisation, energy transition, and power infrastructure.
Financials and banks: Expected to benefit from lower interest rates, supporting margins and improving asset quality.
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Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of the expert, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.
