Don't prefer TCS, rate HCL Tech as outperform: Credit Suisse

Sakthi Siva of Credit Suisse says while technology is the best performing sector year-to-date (YTD) in MSCI Asia ex-Japan, the brokerage house highlighted the de-rating of Indian IT (15 percent underperformance YTD) and particularly TCS, the market darling.

Price-to-book value (P/BV) of TCS has dropped from a high of 10.7x in September 2014 to 6.35x. On P/BV versus return on equity (ROE) valuation model, TCS' premium has dropped from a high of 350 percent in September 2014 to just 102 percent currently, she says.

Indian IT's premium has dropped to just 45 percent from recent highs of 193 percent.

"While we acknowledge the severe de-rating of TCS and Indian IT, we are not yet tempted to bottom fish as ROE is either at historic lows or below for TCS, Infosys and Wipro," Siva says.