Continue to remain optimistic on TCS, Infosys and HCL Tech: Mayuresh Joshi

In a chat with ET Now, Mayuresh Joshi, Fund Manager, Angel Broking, talks about the weak commentary by Persistent Systems and what could it mean to IT sector at large.

ET Now: What is your sense on the IT sector? Persistent has disappointed; KPIT has come in and given a bit of a warning. The stock was already down 9 per cent, before the clarification release went to the exchanges. That said Accenture's guidance might just have a slightly positive effect on largecap IT stocks. What would you be doing here?



Mayuresh Joshi: The profit warnings that we have seen from the midcap IT companies are getting reflected in the way their stock prices are moving. We have maintained that the top tier names look far attractive to us compared to the midcap IT pack. We have been holding on to this view consistently for the past few months.

There are quite a few reasons. Top tier IT names will definitely benefit from recovery in discretionary spends. The valuations are very supportive.

If you see the breakup of HCL Tech's revenues, you will find that application services accounted for 41.5 per cent of the revenues. Its infrastructure management services contributed 34.5 per cent, while the engineering division accounted for 18-18.5 per cent of the total revenues.

With order wins coming through on the IMS front, and substantial margins seen on the engineering side, we expect to see substantial improvement in the earnings growth going forward.

Our own expectations is that dollar revenue growth should be anywhere between 13-13.5 per cent for HCL Tech. In rupee terms, it should be close to 13.5-14 per cent. Valuations are simply too attractive.

Similarly for Infosys, it is doing a whole lot of acquisitions after Vikas Sikka's appointment.

The clients wins that it has done over the past few months stands in good stead. Clearly, with kind of guidance that the midcap IT firms have given, we expect top tier IT pack to report growth anywhere between 12 per cent and 15 per cent in the constant currency terms.

In that sense, the expectations on consumer discretionary spends look good over the next few quarters.

In addition, the earnings trajectory is looking extremely robust in terms of the client wins that these guys are seeing. Valuations are looking attractive, as I said. So, the top tier names are something that is attracting us. We will continue to remain optimistic on stocks like HCL, Infosys and TCS.