Divergence in performance of IT stocks may widen further; prefer Infosys: Nitin Jain

In a chat with ET Now, Nitin Jain, CEO, Global Asset & Wealth Management, Edelweiss Financial, shares his view on the recent spate of negative commentaries by the domestic IT firms.

ET Now: What is your view on the IT pack after Tech Mahindra cut its guidance for the first quarter. What is the sense that you are getting from the commentary? Could it be another domino effect like we saw in the last quarter? Can we expect all IT majors to come out and give profit warnings?

Nitin Jain: There is a very interesting trend that is emerging in the IT space. You would see a significant divergence in terms of stock performances over the next two to three years. There is a very big wave of SMAC (social, mobile, analytics and cloud) that is happening across the globe. There are a lot of companies, which have been able to adapt to the new regime and to the new social media analytics and cloud segment. They are doing extremely well. If you see Cognizant’s or Accenture’s recent numbers, they are showing up good numbers.

Indian IT firms, which are just focused on labour arbitrage, classical business models, could face challenges. I am not calling it a ‘doomsday’ for those businesses. But, I believe that growing incrementally in the traditional business might be a challenge.
Hence, you are seeing a big shift that IT firms are trying to create in their business models. Some of these companies will be successful, while others may not. If you ask me to pick winners, I would say that only the large
guyslik Infosys seems to be making a significant headway seems to be Infosys. So this dichotomy in IT will continue.