EXCLUSIVE | IT stocks are 'contra bet' at 5-year low valuations; KPIT Tech preferred pick, says ICICI Securities’ Pankaj Pandey

Domestic listed IT firms' stocks, which have underperformed the broader market this year, are emerging as an attractive contrarian investment opportunity after a sharp correction, according to a market expert. In a conversation with ET Now, Pankaj Pandey, Head of Research at ICICI Securities, said that the Nifty IT index has declined nearly 15–16 per cent this year, but valuations have now fallen to five-year lows on one-year forward price-to-earnings multiples, creating a favourable risk-reward setup.

“At a time when global markets are jittery over expensive AI-linked trades, IT stocks offer relative valuation comfort,” Pandey said.

Is this is right time to re-look at IT stocks after the correction?

Pandey believes the recent sell-off has already priced in most near-term concerns, making the sector a good contra play. Among individual stocks, KPIT Technologies remains ICICI Securities’ preferred pick within IT services, given its strong exposure to the European market.

“We like KPIT Technologies shares for its structural growth visibility, especially in Europe,” Pandey said, adding that the brokerage has a target price of Rs 1,475 on the stock.

FMCG valuations still expensive, stock selection is key: Pandey

On the FMCG space, Pandey struck a cautious tone and noted that while growth remains steady, valuations are still not attractive across the board.

“Volume plus pricing growth for FMCG companies is likely to remain in the mid-to-high single digits, while valuations are not cheap,” he said.

ICICI Securities' analyst has preferred selective names such as Marico and Tata Consumer Products, where the food portfolio continues to grow in double digits. Asian Paints also remains a preferred stock, backed by around 10 per cent growth in the last quarter and similar expectations for the second half.

Addressing concerns around Bangladesh exposure, Pandey said the impact on Indian FMCG companies is limited and unlikely to materially affect earnings or pricing.

Power sector offers structural opportunity; top stock pick 'Tata Power'

The ICICI Securities' Pandey remains constructive on the power and capital goods sector, which has seen muted price performance over the past year.

“Power is a space that should do well structurally,” he said, adding that Tata Power is ICICI Securities’ top pick due to its integrated presence across generation, transmission and distribution.

The company’s expanding renewable energy portfolio and the opening up of nuclear power further strengthen its long-term outlook, according to Pandey.

HVDC transmission will be long-term growth engine

On power transmission, Pandey highlighted High-Voltage Direct Current (HVDC) projects as a major long-term opportunity, especially as India continues to add renewable energy capacity.

“A typical HVDC project can be worth around Rs 20,000 crore, with equipment orders forming nearly half the value,” he said.

While global players such as Hitachi Energy, GE Vernova and Siemens Energy dominate the space, Pandey said Siemens Energy remains ICICI Securities’ preferred way to play the HVDC theme.

“As renewable energy scales up, HVDC transmission will become increasingly important well beyond 2030,” he added.

(Interviewed by Sajeet Manghat and Hersh Sayta)

(Disclaimer: The above article is meant for informational purposes only, and should not be considered as any investment advice. ET NOW DIGITAL suggests its readers/audience to consult their financial advisors before making any money related decisions.)