Multibagger Stock: IT stocks have led the recent bull market rally, Nifty IT index has also gained 73% in last one year, it is the major Nifty index (Banks, FMCG, Auto, Pharma) as well as Nifty 50 has crossed the benchmark index. However, Nifty IT has seen some correction (8-10%) recently.
ICICI Securities has suggested that investors can use this temporary blip to make further investments in Indian IT stocks as the brokerage firm expects a moderate to close due to some structural changes taking place on the ground. IT spending will remain strong in the long term.
The brokerage firm is raising the target multiple for TCS, Infosys, TechM, LTI and Persistent and maintaining its ‘Buy’ rating. It has upgraded Wipro, HCL Tech, Mphasis and Coforge from ‘Hold’ to ‘Buy’ and assigned a higher target multiple. Further, it has given a pre-BUY rating to Mindtree as it believes that the growth is largely based on the current market price.
What is the say of brokerage firm
ICICI Securities says that, Kovid-19 has prompted industries across the world to bring changes in their business models like work from home with minimum disruption. This prompted businesses to change their model from captive to outsourcing, which is expected to benefit Indian IT companies. “This has already started with the recent deals of captive units of certain businesses of Infosys and TCS,” it said in a note.
Recent Accenture guidance suggests that the demand environment for Indian IT companies remains strong. In ICICI’s view, it is not a quarter, but there are some structural changes taking place on the ground that may bring happiness to Indian IT companies in the years to come.
However, the brokerage said it does not rule out margin pressure on Indian IT companies in the near term, but in the long term, strong revenue growth could help tide over these costs.
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