After Indian information technology stocks rebounded on Wednesday after five consecutive sessions of decline, leading market expert Nischal Maheshwari has maintained a grim outlook on the sector. In an exclusive interaction with NDTV Profit on Feb. 25, Maheshwari said that he belives the domestic IT pack have been oversold in the short-term and today's recovery wa sa 'dead cat' bounce for the stocks. IT stocks have dragged Indian equities over new languge models of artificial intelligence.
A dead cat bounce is used to describe a situation when the price of a stock or other asset increases swiftly before falling just as quickly. It is dervied from the expression that a dead cat would bounce if dropped from a great height. Hence, it means that after a significant correction or downward trend, there is a short-term price increase for an asset, counter or an index.
Led by mid-cap counters like Mphasis Ltd., Coforge Ltd., and Persistent Systems Ltd., all leading domestic IT stocks rebounded during early trade on Wednesday. However, in the large-cap space, LTIMindtree Ltd., and Tech Mahindra Ltd. gained over 3%. This followed a strong bounceback in US-based tech stocks, after AI startup Anthropic announced plans to broaden access to its Claude chatbot through new collaborations across software and services.
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IT vs Metals: What should you bet on?
Indian IT stocks had fallen to multiyear lows, with the Nifty IT index sliding 21% so far in February. Indian IT stocks had fallen to multiyear lows, with the Nifty IT index sliding 21% so far in February. Valuations for both large- and mid cap companies are now hovering near their lowest levels in three to five years. Amid AI fears triggering volatility in the IT pack, Maheshwari told NDTV Profit that for the short-term, one can look at IT stocks for making some profits, but ''definitely not for investments''.
''The IT sector has not bottomoed out as yet. It is too early for us to figure out what would be the long-term impact of AI on the IT sector. So, totally avoid IT,'' the market expert suggested investors. Coming to domestic metals, Maheshwari believes that the sector has logged a good rebound, but investors should still be cautious as ''quite a bit of it is already priced-in''. The India-US trade deal and the uncertainty around the fine-print of the tariff rate has kept metal stocks volatile in the near-term.
Pockets of opportunities
Coming to banks, the market expert believes that there's not much to worry about banks as yet. ''There's some profit-booking happening in public-sector banks, which are being balanced out by private banks. One day private banks work, and the other day PSBs work,'' he said. Maheshwari believes banks is a ''good place to be in''. He has picked large-cap private banks as his long-term bet. The top stock picks are ICICI Bank, IndusInd Bank, and HDFC Bank, according to the expert.
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He added that the domestic-oriented sectors such as cement, construction, metals, and defence are also ''pockets of opportunities'' for investors. The industries catering to data centres will also be a good bet, as per the expert. Many solar energy stocks hit lower circuit during trade over US President Donald Trump preliminary duties of 126% on solar imports from India. However, Maheshwari believes solar companies have a long runway ahead and maintains a positive stance on the sector for long-term.
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