IT under pressure, energy & bank PSUs may deliver 25–30% upside: Gautam Shah

India’s IT stocks may not be near a bottom yet, even after sharp corrections, while PSU banks, metals and energy could continue to outperform, says Gautam Shah, Founder of Goldilocks Global Research.

Speaking to ET Now, Shah maintained a bearish stance on the Nifty IT Index, calling the weakness “structural” rather than cyclical.

IT: “Do not catch a falling knife”

According to Shah, the market reacts swiftly when it senses structural disruption, much like during the Covid crash, and IT stocks are currently facing similar fear-driven repricing.


He cited three key concerns:

• Elevated valuations built on long-term growth assumptions
• Structural AI disruption to traditional IT services models
• Technical chart breakdowns across large and midcap IT names

“Even after such a big fall, many midcap IT stocks are still trading at rich valuations,” Shah said, adding that Excel-based projections for the next 5–10 years may now be outdated in the AI era.

On levels, he flagged 31,000 on the Nifty IT Index as a crucial support that has broken, with potential downside toward 28,400 and even 26,000 over a 12–18 month horizon.

Short-term rallies, he cautioned, are likely to be sold into.

Nifty may stay range-bound

Given IT’s heavy weightage in the Nifty — alongside Reliance Industries — Shah believes index-level gains could remain capped despite strength in other pockets.

“We will go nowhere on the Nifty,” he said, predicting:

• Rallies will hit resistance
• Dips will find support
• The index may remain range-bound

However, domestic liquidity — including ₹30,000 crore monthly SIP inflows — is providing strong structural support to equities.

Rotational trade: PSU, metals, energy in focus

While growth stocks face valuation pressure, Shah sees capital rotating decisively toward value themes.

He prefers key sectors like PSU banks, PSU energy and power and metals (both ferrous and non-ferrous).

He estimates metals could see another 15–20% upside, while the broader PSU basket — particularly energy-linked names — could deliver 25–30% gains.

“Money is hiding in value,” he said, adding that stocks with PE multiples between 8 and 20 are attracting flows.

Energy theme backed by geopolitics

Shah also pointed to potential strength in crude oil, with charts indicating a possible 15% rally in NYMEX crude.

If oil prices rise, energy-linked PSUs could benefit. Among preferred names, he highlighted:

• NTPC
• Oil India
• Oil and Natural Gas Corporation

He stressed that this is not a market to chase smallcaps aggressively, noting that “big boys” have provided relative stability over the past year.

PSU banks: Rally not over yet

In banking, Shah continues to favour public sector lenders, calling them a proxy for the India value story.

While State Bank of India remains a preferred name, he believes tier-II PSU banks could offer even stronger relative value.

Top picks include:

• Punjab National Bank
• Union Bank of India
• Bank of Baroda
• Bank of Maharashtra

“These banks have done well in difficult times and could do bigger things if the Nifty stabilises,” he said.

Big picture: Bipolar market to continue

Shah described the current environment as “bipolar” with IT and select heavyweights underperforming and value sectors at or near lifetime highs

For investors, the takeaway is clear: avoid trying to bottom-fish in structurally weak sectors and focus instead on areas where momentum, valuations and liquidity align.

“The charts are disrupted in IT,” Shah concluded. “Until they change, stay committed to where the strength is.”