Stock Buzz: Keep a watch on MindTree from midcap IT space

ET Now's Nikunj Dalmia shares views about MindTree based on market sources. Excerpts:

Nikunj Dalmia: In this week, we have seen an interesting pattern. Traders have pulled money out of cyclicals and we have seen some departure of activity from cyclicals and banks. Money seems to be flowing back into IT sector. A lot of people who want to buy into IT but want to avoid large cap IT stocks because they are expensive and might not be a good alpha trade are revisiting midcap IT stocks. MindTree fits that bill.

The top three shareholders of MindTree include names like Nalanda Securities run by Pulkit Prasad who was with Warburg and first time investor in Bharti, Amansa Capital owned by Akash Prakash and HDFC Midcap Fund run by fund manger Chirag Setalvad. These three guys are actively accumulating MindTree on every decline.

Smart money is moving back into MindTree. The reason for this is because valuations are attractive, markets expect that there could be a PE expansion because it is a good quality management, the stock is trading at around 10-11 times, the cyclical issues for MindTree are out and the enterprise operation for MindTree could stabilise soon.

Large cap IT stocks are expensive. Midcap IT stock like MindTree is cheap. The management quality is decent and the shareholding pattern is very impressive comprising of Nalanda Securities, Amansa Capital and HDFC Mutual Fund which has a 3.5% holding in it.