Infosys, which has fallen nearly 13 percent over the last one year, continues to instill confidence among fund managers. And, not just the blue-chip, tech stocks of any category continue to charm investors.
In the Moneycontrol’s Diwali Party to usher in Samvat 2080, Vikas Khemani said that his Carnelian Asset Advisors has been “very positive” on IT, though more on midcap IT, and added that they like Infosys as much. Khemani pointed out that IT stocks are like consumer stocks, from a risk-reward perspective, and that IT stocks now come at better valuations.
The discussion was around how the sentiment over IT stocks is changing for the worse with US growth concerns and the market expecting them to make a comeback only in FY25. Khemani believes the IT stocks were "absolutely" on course for a turn around. “We’ve been very positive on IT, not as much on the largecap IT but midcap IT stocks,” he said.
He said that the narrative over the last 12 to 18 months have been around IT demand slowing down in the US but added that the orderbook of Indian IT companies does not reflect this (drop in demand).
According to him, when the business environment is “fluid”, company managements may not be comfortable giving aggressive guidance. However, the companies that Khemani’s team have invested in have seen their bottomline grow 18-20 percent and, he added, “these are large companies”.
Khemani said that Infosys, which is a “great company”, has created “a huge amount of wealth” after Salil Parekh joined as its CEO in 2018. He highlighted the similarity between IT and consumer stocks, and added that IT stocks come at better valuations.
“They (tech stocks) have similar kind of cash-flow, similar kind of growth trajectory… In fact, some of the IT companies grew faster than that (consumer companies),” Khemani said. “So, we've been kind of very positive on the IT sector per se, and we like Infosys as well.”
Lakshmi Iyer, CEO for investment and strategy at Kotak Alternate Asset Managers, explained why she was positive on IT stocks. Infosys was placed in one of the sections as a “ground-wheel” stock, which shoots out sparkles but not vertically. “We need to understand that eventually it will radiate light… That is where the perception is on the IT sector,” she said.
Also read: Samvat 2080: Not easy to make money in a tough market like today, says S Naren
Iyer pointed out that the free cash-flow generation is happening in the IT sector and, with the price-point correction, some of the stocks are “worthy” of being owned. “The sector is absolutely under-owned (when considering the stocks that mutual funds own),” she said.
Iyer added that going by mean reversion and by people’s tendency to rush to defensive sectors when there is volatility, the stocks could see a comeback though that may happen with the lag of a quarter or two.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
