​Pininfarina buy, Chennai floods do not affect Tech M: Gaurav Mehta, Ambit Capital

Stocks of Tech Mahindra look attractive despite the market being negative on its acquisition of Italian auto company Pininfarina, says Gaurav Mehta, VP-Institutional Equties, Ambit Capital. In an interview to ET Now, he says that a tech giant like Tech Mahindra does not get affected by 'temporary events' like the Chennai floods.

ET Now: Why are you bullish on Tech Mahindra? The bad news is out in the open: everyone knows that this not will be a good quarter for the IT sector per se and adding to the seasonal weakness are problems in Chennai.

Gaurav Mehta: You have to take into account how much of that has already been priced in. You have to look beyond these temporary factors and at a certain price point, if the long-term story still makes sense to you, you jump in.

There was a bit of an overreaction yesterday in Tech Mahindra socks on account of its acquisition of Pininfarina but the stock is still attractive. We are bullish on most front-line IT names, not just on Tech Mahindra, because we think that this price correction is overdone. Valuations are very reasonable now and Tech Mahindra, in particular, has 15.5-16 times one-year forward earnings.

We do not see if anything has changed to derail the longer-term view. Setbacks like Chennai floods or the acquisition of Pininfarina getting a thumbs down from market, is temporary.