Stocks to Buy | Value Hunt: Dipan Mehta on why banks, NBFCs, renewables still offer promise​

The recent volatility in crude oil prices, including spikes due to geopolitical tensions like the Iran-Israel skirmish, has not significantly impacted Indian markets. Dipan Mehta in an interview to ET Now emphasized that the influence of crude oil on inflation and corporate margins in India is fading. Instead, commodities like copper and aluminium are becoming more relevant for market movements.

According to Mehta, the Indian market is currently experiencing a period of balance where liquidity supply is matching demand. Broader indices like Nifty Bank continue to show resilience despite minor corrections. The next key trigger for market sentiment is the 9th of July, when the temporary pause in Trump-era tariffs is set to expire, possibly impacting global trade and equity flows.

Mehta remains bearish on the Indian IT services sector, especially the midcaps. He notes that while a few companies like Persistent Systems and Coforge show some growth due to vertical-specific focus, the sector overall is in a slow-growth phase. Most firms are still focused on legacy support services and have failed to evolve into innovative or product-driven businesses.

There is disappointment in the fact that Indian IT companies have not embraced AI-led innovation. Mehta points out that while AI is disrupting industries globally, India lacks companies building core AI engines or providing AI-as-a-service. He attributes this to shortsightedness among investors who are content with low but stable growth rates.

Despite the gloom in mainstream IT, Mehta sees promise in a few differentiated tech plays. Companies like RateGain, Zaggle Prepaid, Sagility, and Aurionpro are experimenting with niche platforms and services. While these are often expensive in terms of valuation, they represent a shift away from the traditional IT outsourcing model.

In a market where valuations are generally stretched, banks and NBFCs still offer relatively attractive risk-reward profiles. Mehta suggests that the NBFC space is currently in an upcycle, making it a potential area for investment. Other promising sectors include capital goods (especially renewables), retail, and cement — though picking the right stocks is crucial.

There’s a growing difficulty in finding sectors that are both reasonably valued and showing strong growth. Mehta admits that investors need to dig deeper to uncover such opportunities. While no sector stands out dramatically right now, he remains optimistic that fresh ideas will emerge in time.