FY17 year of transition for IT; bullish Infosys, Tech Mah: Kotak

Moneycontrol BureauBrokerage house house Kotak Institutional Equities sees FY17 as a year of transition for Indian IT companies and warns that a stable rupee could be a risk to margin.“The ability of Indian IT to protect margins will be tested in FY2017 largely due to many moving parts and increased complexities that would make execution of traditional margin levers difficult in the near term,” says the Kotak note to clients.At the same, Kotak expects margins to be stable in the medium term helped by investment-led acceleration in growth, likely streamlining of delivery in by large-scale reskilling, and success of automation initiatives.Kotak rates Infosys and Tech Mahindra as its top picks in the sector.“Infosys is well-positioned to sustain leadership in growth, courtesy structural changes implemented by Dr Sikka. We like Tech Mahindra for its continued strengthening of leadership in telecom and progress on the enterprise segment even as we caution that the near-term outlook is weak,” says the Kotak note.