Infosys, TCS hit 52-week lows

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Infosys, TCS hit 52-week lows

Infosys and TCS virtually hit 52-week lows yesterday and Citi Group came out with a down grade on Infosys at that price level.

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Q: It must be a psychological hit to see Infosys crumbled to a 52-week low from here on can it start building or not yet?

A: You are tempted to say yes because valuations are now on their side and there is no denying that. But sometimes stocks get cheap and nobody wants to buy them. The case in point is yesterday Infosys and TCS virtually hit 52-week lows and Citi Group came out with a down grade on Infosys at that price level.

These guys have all been bullish on technology for the last one-year when the stocks have been underperforming then their price targets for Infosys was Rs 2,500-2,700 and now more the stock falls more the bearish they become on the sector saying it is almost like oh gosh we got our call wrong but let's now a tone for it now by down grading the sector even more.

Yesterday I was quite amazed that after such underperformance comes down grade from the Citi the kind of short piled up which is visible in many of these tech counters is telling you that the street is still quite bearish on tech as a sector. It is very hard to expect outperformance from the sector as such but it's equally hard to project how these stocks will fall significantly more from here. Because at Rs 1,700 Infosys is trading at probably 16 times next year's earnings. Satyam is trading at probably 13 times next year's earning so there is been such a severe valuation compression already, which is happened in many of the large cap names that I don't know how much more downside and whether you will make a lot of money shorting this sector.

However the dollar the way is going for a toss overseas and the news from the Cognizant, Citi down grade, fresh shorts will probably keep a rich check on the outperformance from here on. At best range I don't think there is too much money in the downside from here by shorting them and upside you know that whatever anybody says that the force of gravity is just too much for these stocks now.