IT back in the game, may grow in double digits in Q4: Gautam Duggad

NEW DELHI: IT has made a remarkable comeback in the last 3-4 months, considering the fact that it languished for much of 2017-18. This quarter too holds promise for the sector.

This is what Gautam Duggad, Head of Research, Motilal Oswal, thinks. He spoke to ET NOW in an exclusive interaction.

There are many positives -- attractive valuations, solid free cash flow generation, strong balancesheets and a falling rupee against the dollar. These are the major tailwinds for the sector, Duggad noted.


The Nifty IT index has grown 8 per cent in the first quarter of 2018.

"We are expecting that in a structurally adverse environment for IT, CY18 could offer a cyclical reprieve. Given the current valuations, there is still some room for IT companies to keep doing well because they are still trading in the 15-16 band (P/E ratio). TCS is available at around Rs 19-19.5 one year forward," Duggad added. "Technology is making a big comeback after seven-eight quarters of sluggish growth. We are expecting a double digit profit growth."

Duggad expects IT major Infosys to offer a guidance of 6-8 per cent growth. "When it comes to IT, the last two quarters have shown a slight pick-up in revenue momentum which we expect to continue in the fourth quarter as well," Duggad added.

The expert is going with mid-level companies within the IT space. He is betting that they are expected to continue to outperform the tier I pack significantly. "They are fortunate to have a right mix of the portfolio and we have seen significant management changes over the last two years in a lot of these tier-II IT companies."

D K Aggarwal, Chairman and MD, SMC Investments and Advisors, in a write-up on ETMarkets.com said, "The information technology sector has been continuously recovering from what has been a tough year earlier due to a broader slowdown in technology spending by banking and financial companies and uncertainty over work visa rules in the US. The optimism has returned as the sector now has diversified into more lucrative digital segments such as cloud computing, Artificial Intelligence (AI) and Big Data."

READ MORE: https://economictimes.indiatimes.com/markets/stocks/news/indian-it-at-inflection-point-the-biggies-hold-all-the-aces/articleshow/63145265.cms

Kotak Securities also has a positive view for the March quarter, saying it will be better than a year ago. "We expect companies to start off on a conservative note for FY2019E revenue growth guidance. Expect 6-8 per cent c/c revenue growth guidance from Infosys and 8-10 per cent from HCLT with no change in operating margin guidance band. We maintain our constructive view on Infosys and Tech Mahindra," the brokerage said in its earnings preview report.