Bearish on Infosys: Gaurav Mehta

In a chat with ET Now, Gaurav Mehta, VP, Institutional Equities, Ambit Capital shares his views on the Infosys, IT space.

ET Now: Infosys from the recent high which is 3850 has corrected by more than Rs 500. Do you think after a Rs 500 correction on Infosys, is the risk reward ratio not favourable to buy into Infosys?

Gaurav Mehta: There are two parts of this question. First of all it is specific to Infosys. We have been sellers fundamentally on Infosys for the last three years now although market has held quite a lot of hopes on NRN coming back and revamping Infosys but we do not think the signs of turnaround visible as yet. So from a fundamental standpoint, we remain sellers on Infosys and we do not think that even now the risk reward favours buying Infosys.

Secondly from this IT pack as a whole, eventually valuations do matter. Last three-four years, we have seen that investors have hardly had any choices of where to invest their money in and which is why these three-four pockets, IT, consumers and pharma have been the default choice. Now as we enter a more normal market scenario, that set of choices available to investors are now increasing and as that happens, these valuations become bit more important than they were in the last three-four year period.

Earlier you talked about OMCs clearly from a historical standpoint they are trading at a record discount to the Sensex’s valuations. Talk about something like a pharma, oil and IT, these are trading at multiyear high w.r.t their relative valuations versus the Sensex. So clearly we think that this move away from these sectors has just begun and overall, we do not think that there are too many screening by opportunities in the IT space as a whole. Specifically to Infosys, we continue to be sellers in that stock. We do not see any concrete signs of a turnaround as yet. It is all hopes the market is betting and we would not advise buying into that stock even at these levels.