IT Sector Outlook: The growth of the IT sector in the midterm can be in double digits.
IT Sector Outlook: Prior to the third quarter results, IT stocks continued to be strong. TCS, Infosys, Wipro and HCL Tech reached their 52-week high in Tuesday’s business. This rally in the IT sector has increased for 3 days. The earnings season for the third quarter of FY 2021 is beginning with the TCS results on 8 January. There is a lot of expectations from the IT sector in the expert earning season. They believe that companies have got a strong deal in the December quarter. Digital and clouding deals have increased. Companies will benefit from increased demand in the cloud, digital transformation, cybersecurity and AI. In the midterm, the growth of the sector can be in double digits.
Growth expected in double digit
Brokerage house Motilal Oswal believes that the growth of the IT sector can remain in double digit in the mid-term. According to the brokerage, the IT sector is currently trading at a 40 percent premium to its 10-year average multiple. However, the sector will benefit from a strong deal, digital transformation, focus on workplace management and large corporate increasing spends on clouding. The brokerage says that Infosys can be a winner in Tier 1 companies. The brokerage house said that the rally could continue in the stocks with a 3 per cent growth on a quarterly basis in the seasonally weak third quarter. Infosys Apart from TCS and Wipro The rally is also expected to continue in India.
These reasons will benefit
According to brokerage house MK Global, Tier 1 tech companies may see 1.5-2.5 percent growth on a quarterly basis in the term of constant currency. At the same time, the growth in Tier 2 companies on quarterly basis is 2.4-5.5% According to the report, companies will benefit from increasing demand in cloud, digital transformation, cybersecurity and AI.
The brokerage says that even in the December quarter, the travel expenses of companies have been low, while weakness in the rupee and strengthening in the dollar will benefit TCS and companies that have a large revenue base in the US. IT companies have implemented a promotion and salary hike, which will have an impact.
IT companies have got good deals in the third quarter. This includes Digital Deal, Vendor Consolidation Deal, Core Transformation Deal and Integrated Mega Deal. Many deal companies are in the pipeline. IT companies will also have the benefit of being forced to order order.
MK Global Infosys, HCL Tech, Tech Mahindra Like Tier 1 companies are advised to invest, while TCS and Wipro are advised to hold. Investment in shares of PSYS and FSOL in Tier 2 companies is advised.
According to brokerage house Credit Suisse, top companies are now recovering from the impact of COVID 19. In the mid-term, Infosys and HCL Tech can outperform.
(Note: We have given the details of the shares here on the basis of the report of the brokerage house. There are risks in the market, so consult the experts before investing.)t