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Jul 13, 2012, 11.15 AM IST
Buy TCS on dips, says Sandeep J. Shah, CEO, Sampriti Capital.
Shah told CNBC-TV18, "Last time after Infosys results, I had said that Infosys is off my investment radar screen even though it is a great company and our top picks would be TCS and HCL Technologies , which is the current consensus as well. I think TCS has reported a good set of numbers but it is also important to remember that they have seen a 1% price decline. I think pricing is going to be a key challenge for most companies even though for TCS it has only been a 1% decline."
He further added, "I think the volume growth has been 5% which is a fairly good number because 1% they have lost because of cross currency. The fact that they are able to scale up the business, they are growing in most geographies, they are growing across verticals, that is a fairly good sign."
"TCS had some trouble a few years back; they got over it, cut their prices but now their margins are in-line with Infosys as well and I think there is a case that Infosys margins may fall off as they need to continue cutting prices. So TCS will continue to remain the top pick but it is not a stock that you can jump and buy because headwinds continue whether it is in Europe or the US. Globally, growth is a very serious issue and you are going to see regulatory action there. So TCS would remain the top pick but it is a stock you want to buy on weakness."
"I think you would want to wait for HCL Technologies results but at the same point of time, the only thing that I would like to add on as far as Infosys is concerned is that the price is back to where it was in 2008 and the earnings are higher. The point is that Infosys has finally started taking price cuts and focusing on volume, they are talking about 8-10% volume growth for this year, which is a reasonable growth. It is still lower than what NASSCOM is forecasting."
"Infosys is in the middle of a transformation. I think Infosys is now finally getting to a price where it is back on my investment radar screen but I am in no rush to buy it there. As far as the mid-sized companies are concerned, it is very difficult to jump in and buy some of the mid-sized companies when the largecaps are facing some amount of headwinds. So TCS results are good but they are not great."
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