IIFL's top midcap picks to power your portfolio

Excerpts from Markets Midday on CNBC-TV18 Watch the full show » RELATED NEWS India`s appetite for coal expected to rise sharply Stocks in news: Micro Inks, Ashok Ley, Inox, Fame India Analysts' take on stocks/sectors in news ALSO READ See what other experts are saying about markets See what FIIs are saying about the markets See what Udayan Mukherjee is saying about the markets 3i Infotech BSE | NSE 10/02/12 Are Mutual Funds betting on 3i Infotech? Other Stocks in this news Patni Computer Systems | Mahindra Satyam | Infosys | Tata Consultancy Services | HCL Technologies | Wipro |

In an interview with CNBC-TV18, Sandeep Muthangi, Tech Analyst at IIFL, spoke about his views on various stocks/sectors.

Here is a verbatim transcript of an exclusive interview with Sandeep Muthangi on CNBC-TV18. Also watch the accompanying video.

Q: We have seen the best of the earnings coming out from the IT sector itself in this particular earning season. What is your view going forward? Do you still believe that is a sector to back on that you would be backing as we go into FY11?

A: We had a range of companies. All the four are leaders of Indian IT industry-- Infosys , TCS , HCL and Wipro . The message clearly is that the recovery is back on track. As we witnessed in the last quarter with TCS and Wipro, every service line, every geography and key industry grew on a sequential basis. Hence, the recovery is definitely there. Going ahead, we have more visibility on the client budgets now.

There is more substance behind all the outsourcing members. The outsourcing budgets are looking healthier. Hence, I would expect that the growth is likely to continue. There was only a touch of caution on the escalating cost base. The salary hikes would happen. The hiring is also starting to pick up. So there is a touch of caution on the margins for a coupe of quarters but growth is definitely back on track.

Q: You have upgraded your earnings of TCS and Infosys by about 5% after the earnings. Will you want to improve it after you heard the companies yet again?

A: Today and yesterday have been mostly qualitative information. I would say reaffirming our view and confidence in the upgrade cycle in IT services upgrades have been happening for the past three quarters. The first two quarters have been very strong. In this quarter, the expectations were already there. Despite that, the company is positively surprised. We should not forget that and the upgrade cycle continues. So the recovery is strong and there might be a couple of upgrade quarters left but that is how it looks like.

Q: You have a buy on Patni and Infotech in the midcap space. What kind of price levels are you looking at?

A: Our recommendations are primarily based on a one year view of the companies. For example with Patni and Infotech, Patni has been fortunate of Satyam's fallout. It shares lot of clients with Satyam and so it has been a beneficiary. Infotech operates in a very niche area, engineering services. In the latest quarter, it was the best performing.

It had the best performing revenue growth among the midcaps because of its niche position at Infotech and relatively benefiting from Satyam's fallout. We continue to remain positive on both of them.