Valuations now attractive, says Sahil Kapoor; sees opportunity in banks and IT

Amid persistent global uncertainty and volatility, a more constructive view is emerging on Indian equities as valuations correct meaningfully across sectors. Sahil Kapoor from DSP Mutual Fund speaking with ET Now noted that the market backdrop has changed significantly over the past two years, pointing out, “Indian markets were trading upwards of 25 times multiple… valuations were also very-very challenging at that time.

Fast forward to today, Nifty trades below 20 times multiple… valuations have come down significantly.” While earnings growth has slowed to a more modest pace, he emphasised that the decline in valuations is now creating opportunities for investors willing to take a long-term view. “Earnings growth is still the challenge, but at least valuations have come down significantly… buying cheap or below fair value is in our control,” he said, underscoring the importance of focusing on what investors can control in uncertain environments.

Within sectors, Kapoor sees financials, particularly private sector banks, as offering compelling risk-reward.

He highlighted that “top private banks are trading close to two times price to book… some are near Global Financial Crisis lows,” adding that such levels provide a favourable entry point even without aggressive earnings assumptions. He further noted that “even if credit growth aligns with nominal GDP at 10% to 12%, it still makes sense to go overweight,” suggesting that reasonable growth expectations are sufficient to justify allocation to the sector. Addressing concerns about competition from public sector banks, Kapoor maintained that the feared disruption has not yet materialised in the data.

“If PSU banks were underpricing aggressively, it should reflect in market share… but it has not appeared in numbers,” he said, adding that private banks continue to gain share steadily despite the prevailing narrative. He also pointed out that investors are currently benefiting from a combination of negative sentiment and cyclical pressures, which have compressed valuations.

In the IT sector, Kapoor acknowledged that growth has slowed sharply, with “revenue growth… between zero to 3%… a very-very low number.” However, he noted that much of this weakness is already reflected in stock prices, making valuations more attractive. Importantly, he highlighted that “margins have not shrunk… that suggests businesses are managing the cycle well,” indicating resilience despite the slowdown. With large IT companies trading at compressed multiples, he believes selective accumulation could be warranted. “At 14–17 times multiples, there is no harm in nibbling into these names,” he said, pointing to strong return metrics and long-term business quality.
On the subject of foreign institutional investors, Kapoor pushed back against the widely held belief that flows drive returns. “Flows do not cause returns… there is no correlation,” he said, arguing that valuations and fundamentals remain far more important. He also noted that currency concerns may be less of a headwind going forward, observing that “the rupee is quite oversold… a lot is already priced in.” This combination of factors, he suggested, could make India more appealing to global investors at current levels. “This is the time to look at India more constructively,” he added.Beyond financials and IT, Kapoor sees emerging opportunities in other pockets of the market as well. He pointed out that “some FMCG names have been completely beaten down… even a small uptick in consumption can revive the sector,” while also highlighting select opportunities in auto ancillaries and chemicals. According to him, the current environment allows investors to build a diversified portfolio of quality businesses at more reasonable valuations.

Despite the improving valuation comfort, Kapoor remains cautious on broader market segments, particularly mid- and small-cap stocks. He concluded, “The preference for us is largecap… small and midcap are still not there,” signalling a continued tilt towards stability and quality in the current phase.

With valuations resetting across key sectors and much of the pessimism already priced in, Indian equities are gradually turning attractive again. However, the approach remains measured—focused on largecaps, quality businesses, and disciplined accumulation rather than aggressive risk-taking.