Is there a case for buying top IT stocks at current levels? Sudip Bandyopadhyay explains

‘IT will be one area which global investors will look at for parking some of their allocation’

ETMarkets.com
Infosys, TCS and some of the other companies which came up with the results are definitely looking good even at current levels.
The new normal is going to present significantly more opportunities for Indian IT companies, says the Chairman of Inditrade Capital.

From the March lows, Infosys stock has already risen 50%. Do you think the good news is already priced in or now with what Wipro did or what the TCS commentary was, there is this fresh lease of life that you are seeing around the IT pack? Do you think there is a case for a further upgrade in the stock price?
What is most interesting in the result is the confidence of the management with which they have come back and started giving guidance. Constant currency revenue guidance of 0% to 2% and the margin guidance of between 21 and 23. I think that shows the confidence of the management, which was absent during the last quarter results when they came and spoke to all of you. So this is a very positive development.


Also what Nilekani has been talking about is how consolidation of vendors at the client end is going to help companies like Infosys. I think that is a very critical point and we have to keep that in mind while looking at the entire IT pack. Keeping these two in mind, definitely Infosys and some of the other companies you mentioned can be looked at even at current levels.

Yes, it has moved up from where it had gone down but the fact remains that there are a lot of uncertainties in the world economy due to the pandemic, the US election and other related question marks on multiple economic parameters. IT will be one area which global investors as well as domestic funds and HNIs will look at for parking some of their allocation. So yes, Infosys, TCS and some of the other companies which came up with the results are definitely looking good even at current levels.

What do you think has worked for Infosys in this quarter? On the face of it, these are strong numbers and strong commentary. You have a revenue guidance and a margin guidance which indicates visibility in business and revenue. Do you think Salil Parekh’s strategy is perhaps finally working and this is also coming at a time when some of its rivals like Wipro and Cognizant are seeing a lot of churn in their top management? Can Infosys benefit from vendor consolidation?
Stability at the top definitely helps but it is slightly bigger and different than just the stability. Last quarter when there was an outbreak of Covid and there were a lot of uncertainties, none of the companies were very sure as to what is going to happen in the future. But now that we have lived with Covid for about four-five months, people are getting used to the fact that US companies and large global conglomerates will start operating with a new normal and that new normal will involve significant technological inputs and technological work.
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Digital is definitely one huge part of that strategy and considering that, Indian IT companies across the board, whether it is TCS, Infosys or even Wipro, we are seeing that they are becoming more and more confident about garnering additional work and not just retaining the existing clients. That is what is coming out in the commentary also that they have not seen any significant attrition or reduction at any of the large contracts. In fact they are talking about deal wins and newer contracts.

So I think the new normal is going to present significantly more opportunities for Indian IT companies to digitise multiple processes and operations of large conglomerates across the world and Indian IT can definitely provide that solution. This digital move all the big companies have started about year, year and a half back. I think now all of them have around 40% plus revenue coming from digital services. So it is a very good place to be in and that will start getting reflected in the results in future and today it is getting reflected in the body language and the future commentary.

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