IT sector poised for better days ahead, financials to outperform: Chakri Lokapriya
Chakri Lokapriya expects IT sector recovery after challenging 2025, driven by AI infrastructure spending benefits for Indian companies. Financial services positioned to outperform with strong banking fundamentals despite recent pressure. Market remains range-bound pending tariff policy clarity and February budget capital expenditure focus. Selective opportunities exist in Reliance Industries, metals sector, and PSU banks.
*this image is generated using AI for illustrative purposes only.
Indian equity markets remain in a wait-and-watch mode as investors navigate global uncertainties and domestic policy developments. Chakri Lokapriya, CIO-Equities at LGT Wealth, shared his perspective on sector dynamics and investment opportunities during a conversation with ET Now, highlighting selective prospects amid ongoing market volatility.
Market Direction Hinges on Policy Clarity
Lokapriya attributes the current market stagnation to two key factors awaiting resolution. "The market is kind of waiting for that one word called tariff. Until there is a kind of resolution, we are going to be range-bound because that creates a lot of uncertainty," he explained. The upcoming Union Budget in February adds another layer of anticipation, particularly around capital expenditure commitments.
| Key Market Drivers: | Status |
|---|---|
| Tariff Policy Resolution: | Pending |
| Union Budget (February): | Capital expenditure focus expected |
| Market Condition: | Range-bound trading |
IT Sector Poised for Recovery
After struggling through calendar year 2025, the information technology sector shows signs of improvement. Lokapriya noted that while the current quarter remains soft, underlying trends are strengthening. "Some of the AI infrastructure spend has now translated into linked systems, and that is where Indian IT services companies will benefit in the coming quarters," he observed.
The sector benefits from stabilizing margins and consistent deal flows. "Total order values are in line to marginally better than expected. Given last year's underperformance, IT should do much better this year," Lokapriya added.
Financial Services Set to Outperform
Despite recent pressure on private sector banks including HDFC Bank, Kotak Mahindra Bank, and Axis Bank, Lokapriya remains optimistic about the banking sector's prospects. He attributed recent weakness to company-specific issues rather than fundamental sectoral problems. "Balance sheets are still very strong, valuations are alright, and banks do very well in a recovering economy," he stated.
| Banking Sector Outlook: | Assessment |
|---|---|
| Balance Sheet Strength: | Very strong |
| Valuations: | Attractive levels |
| Recovery Potential: | High in improving economy |
| Sector Performance: | Expected to outperform |
Regarding public sector banks, Lokapriya sees continued merit, particularly if the February budget emphasizes capital expenditure. "PSU banks will be in demand because capital expenditure flows through them. Their balance sheets are in great shape," he noted, specifically mentioning SBI and Canara Bank as strong contenders.
Selective Stock Preferences
When comparing investment opportunities between Reliance Industries and L&T, Lokapriya expressed a clear preference. "Reliance, clearly yes, because they have a lot going forward in terms of new energy businesses. They have also been impacted by political news like Iran, which presents buying opportunities." For L&T, he advised waiting for budget clarity on capital expenditure commitments.
On the Bharat Coking Coal IPO, which received strong subscription, Lokapriya described it as a "simple, powerful business" benefiting from India's long-term coal demand and the company's market leadership position. He suggested long-term holders continue holding after listing, while shorter-term investors might consider profit-taking around 40.00% upside levels.
Sector-Specific Challenges and Opportunities
The insurance sector faces structural pressures from labor code implementation and competitive dynamics. Rising motor claims have increased provisioning needs, limiting margin expansion. "Margins will remain under pressure, so we have to bank on a recovering economy leading to higher volumes," Lokapriya explained.
In quick commerce, the easing of 10-minute delivery mandates provides neutral impact across the sector. However, intense competition and margin pressures continue affecting valuations. "Multiples and target prices are likely to come down, so it becomes more of a trading stock in the current environment," he cautioned.
Despite recent strong performance, metals retain appeal with continued demand across ferrous and non-ferrous segments. Companies like Tata Steel, Hindalco, and Hindustan Copper benefit from global growth acceleration. "Even though prices have run up, metals should continue to do well," Lokapriya concluded, noting that valuations remain reasonable despite the rally.
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