The Indian stock market saw renewed interest in IT counters this week, with Infosys, TCS, HCL Tech, and Wipro emerging as top gainers. The sector, which has been struggling with global uncertainties, is finally showing signs of recovery, but experts caution against expecting a sharp turnaround.Speaking to ET Now, Deepak Shenoy, Founder of Capitalmind, explained that the biggest drag on IT firms in recent months has been tariff-related uncertainty. “Clients were waiting for clarity on tariffs before making long-term commitments. Now that most tariff definitions are better understood, companies can go ahead with plans they had put on hold for nearly six months,” he said.Shenoy added that while this may lead to gradual recovery, investors should not expect a rapid surge. “The IT rally right now is more about catching up on delayed revenues. Long-term momentum will depend on how effectively companies adapt to AI and diversify their revenue streams. Once firms become leaner and integrate AI-driven solutions, select players could outperform significantly,” he noted.Beyond IT, realty, metals, and pharma stocks also provided strong support to the market on Monday. However, the banking index was under pressure despite management commentary suggesting that net interest margin (NIM) stress has bottomed out.Shenoy highlighted two key challenges for banks. First, falling interest rates could trigger competitive pressure on lending. “Banks have not meaningfully reduced rates over the last two or three cut cycles. With short-term rates dropping sharply, NIMs are likely to contract as competitive pressures build,” he said.Second, the government’s recent ban on real-money gaming is likely to impact transaction flows. “UPI data showed around 35 crore transactions linked to real-money gaming in just one month. That float is now disappearing, and it will pinch banks that benefited from this activity,” Shenoy explained.On valuations, Shenoy believes private sector banks are relatively more attractive at this point. “PSU banks have had a good run, but valuations there leave little room for upside. In contrast, private banks are trading cheaper and could offer better opportunities,” he said.Also read: Patel Retail shares list at 20% premium over IPO priceWith IT staging a cautious comeback and banks grappling with structural headwinds, investors may need to stay selective. As Shenoy put it, “There are pockets of opportunity, but this is not the time to chase momentum blindly.”
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