BackTop picks: Brokerage gives 'Buy' tags to TCS, Infosys, Wipro, 5 other Indian IT stocks
The brokerage has remained positive on the IT sector and maintain Mphasis, Mindtree, Persistent, LTI, TCS and Infosys as its top stock picks
PremiumThe IT sector has corrected significantly over the past five months, with Nifty IT correcting 24% CYTD as compared to a 6% correction in the Nifty index. Over this period, global markets, especially technology stocks, have also corrected sharply.
The stock price correction has largely been due to the derating of valuation multiples, as earnings estimates have mostly remained intact or seen minor downgrades.
Brokerage house PhillipCapital believes that a CYTD correction in stock prices, more than factors in the concerns. It foresees a reversal in these stocks soon, and expects handsome returns from current levels.
The brokerage has remained positive on the Indian IT sector and maintained Buy ratings on Mphasis (target price of ₹3,560), Mindtree (TP: ₹4,300), Persistent Systems (TP: ₹4,330), LTI (TP: ₹5,400), Tata Consultancy Services (TCS) with target price of ₹4,270 and Infosys (TP: ₹1,930) as its top stock picks.
It also has Buy tags on Wipro (TP: ₹560) and Coforge shares (TP: ₹5,000). While has neutral stance on HCL Tech, Tech Mahindra, LTTS, Cyient and KPIT Tech.
The IT sector has corrected significantly over the past five months. Most stocks have given up almost the entire gains that they had made in the second half of CY21, which were boosted by recurring higher-than-expected earnings and a bright outlook.
“Strange and unrelated as it might seem, markets have painted the IT services companies with the same brush as technology stocks – resulting in a high correlation between the Nifty IT Index and the Nasdaq Index. In fact, both have traversed the exact same path in the last five months," the note stated.
"While the global macro fears are for real, we believe their impact on earnings will be minimal and temporary. The demand outlook continues to be super-bullish – by Gartner, ISG, Accenture and Infosys/HCL (in their recent analyst meets). The commentary on tech spending by major BFSI and retail players (two major verticals for Indian IT) also remains strong, despite macro concerns," PhillipCapital added.
The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
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