MindTree, Tech Mahindra and HCL Tech are good bets in the IT space: Prashasta Seth, IIFL AMC

In a chat with ET Now, Prashasta Seth, CEO at IIFL AMC shares his views on the IT sector. Excerpts:

ET Now: What have you made of the recent IT rally and have you been a buyer in that?

Prashasta Seth: We have not bought aggressively now, but we continue to maintain an exposure to IT and pharma even though everything else was moving up. To that extent, our view is that the stocks are reasonably priced especially on the midcap space and there is a visibility in terms of growth. Thus, stocks in the IT and pharma space will provide stability to portfolio and to that extent, you need to maintain a certain exposure to those stocks.

Given the fact that a lot of the rally is being supported by a huge amount of liquidity in the markets, you would get phases in which some of these stocks will do well. From time to time, all these stocks will outperform depending on how much liquidity there is and what stocks are there to buy. Hence, you need to maintain a certain exposure to these sectors also in the portfolio.

ET Now: Which stocks are you liking from IT?

Prashasta Seth: We hold MindTree, a bit of Tech Mahindra and a bit of HCL Tech.

ET Now: No TCS? They are the best in the breed.

Prashasta Seth: That is true. The only thing is that valuations are very expensive. Yes, in this kind of market, valuations call are not working out, but I am more comfortable with a name like Tech M where I think there is a decent amount of growth visibility. It might not be as great as what it is in TCS, but the valuation discount between the two would make up for slower growth in Tech M vis-à-vis Infy.

ET Now: But a no for Wipro? The numbers do not inspire too much of confidence.

Prashasta Seth: We hold Wipro in small quantity. The question is of when the revenue acceleration finally happens. People have just been waiting quarter on quarter for the last three or four quarters. The hope was that you would see revenues ramping up from the second half of this year. Let’s see how it pans out.

The deal inflow has been very strong, but somehow it is still not translating into numbers. What they need to do is to start delivering higher revenue growth. Frankly, if you see the growth in TCS and if you compare it with any other company, it is just too different.

Hence, unless the industry and specific companies can build that gap, you will continue to see this kind of valuation gap between TCS and other players. With Wipro, you just want to wait one more quarter and see that revenue growth coming in. People have just been waiting for it for the last four quarters and it is just not showing up in the numbers.