Overweight on TCS, Infy among largecap stocks, prefer Persistent among IT midcaps: Parag Thakkar

In an interview with ET Now, Parag Thakkar, Head Institutional Sales, HDFC Securities, shares his view on what lies ahead for IT stocks.

ET Now: If we look at the scorecard of this earning season, IT as a sector has seen maximum earnings misses. Do you think the pain in the IT sector is here to stay? Do you think that the pain is not cyclical, but structural in nature?

Parag Thakkar: There are some structural issues the sector is facing for sure. For example, there is a lot of disruption due to the move from cloud and SMAC.

Some of the companies which are a play on this disruption like Persistent Systems will do well because their 50 per cent business comes from SMAC. Of that 24 per cent of business comes from the enterprise digital space that is expected to grow at 30- 40 per cent.

These are select opportunities that one cannot deny. Apart from that, even in the largecap IT space, Infosys, Wipro and TCS have fallen to very good valuations.

Let us do not forget that they generate a lot of free cash flows. Hence, this space remains a contra buy at this point. I would like to be overweight on at least some of these names like Infosys, Wipro and TCS.

In midcap space, I like Persistent Systems. With the US economic data pointing towards a rate hike this year, we are definitely going to see strong dollar. That may also come as a great support.