GST cuts lift market sentiment, IT gains on valuation play: Dhananjay Sinha

After a sharp selloff last week, stock markets bounced back on improved sentiment around GST reductions and hopes for stronger consumer spending, according to Dhananjay Sinha, CEO & Co-head of Institutional Equities at Systematix Group.

Sinha noted that the government’s GST cuts, particularly for the auto sector, have provided a major boost. “The cut in GST and the possibility of the additional cess on passenger vehicles being withdrawn after March 31 have lifted market mood,” he said. He added that spillover benefits could also reach FMCG and consumer goods, supported further by lower lending rates following the RBI’s rate cuts.

With the festive season approaching and markets recovering from recent corrections, Sinha expects positive momentum in the near term. “Global factors also matter, and India’s efforts to build stronger partnerships with China, Japan, and Russia are adding to investor comfort,” he said.

IT sector rally driven by rotation

On the IT sector’s recent strength, Sinha attributed the gains largely to valuation-driven sector rotation rather than strong fundamentals. “The services export data shows some slowdown, so concerns on business traction remain. But since IT valuations corrected earlier, investors are rotating into the space, especially as expectations of a Fed rate cut support tech valuations,” he explained.

Sinha added that small-cap IT stocks often outperform large caps during such phases, as investors chase higher returns. However, he cautioned that the outlook will depend on fresh commentary from IT majors and US clients in the coming quarters.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)