Don't see IT outperforming in terms of stock prices: Dipan Mehta

In a chat with ET Now, Dipan Mehta, Member, BSE and NSE, share shis views on IT sector. Excerpts:

ET Now: Large cap IT has come out and given a bit of a profit warning for the quarter, somehow people are going out and lapping up midcap IT like there is no tomorrow, for example, Persistent is not a cheap stock, even if you look at FY17 valuations it is not a cheap stock by any means, why this dichotomy and do you like the midcap IT space or something within that pocket?

Dipan Mehta: I will take the second question first that although we have investments and our clients own a lot of midcap IT stocks and large cap IT stocks but that is not the sector in which we are looking at increasing our exposure. We are just trying to adjust those weightages slightly lower, short to medium term view on IT midcap as well as large cap.

Discretionary spending may be under stress for the current year and these currency crosswinds may have a major impact and lot of companies have been warning on that count as well. The only explanation I can offer for why midcap IT is doing well just now is that if you look at the entire spectrum of listed stocks, IT and midcap IT are amongst the cheapest in terms of price earnings multiples and some amount of rerating has taken place within that segment

May be there is some amount of pre-result buying taking place across the segment on the hope that the numbers may be quite positive but I would not like to ride this particular trend. Investors should brace themselves for slight disappointing results across the entire IT sector. December is a soft quarter, so quarter on quarter numbers, year on year numbers may not be that encouraging and if you recollect even September quarter was not that great for the industry. There will always be a few exceptions but by and large I do not see IT outperforming in terms of stock prices or in terms of numbers reported.