Brokerages are once again bullish on the Infosys stock, as the turbulence in the company’s management settles and a likely revival in the IT sector is seen by industry lobby Nasscom.
On Wednesday ,Infosys and other IT sector heavyweights were much in demand on the bourses, with a weakened rupee making the stocks more alluring.
The BSE IT Index outperformed and closed 2.20 per cent up as index heavyweights notched up sharp gains.
Though Infosys gained relatively less than its peers at 1.23 per cent--Tata Consultancy Services gained 3.33 per cent, HCL Technologies 3.88 per cent and Tech Mahindra 3.73 per cent--brokerages are positive on Infy.
The rupee’s weakening against dollar to 64.75 also helped the IT stocks.
HDFC Securities analysts Apurva Prasad and Amit Chandra, in a research note on Infosys, said, “We believe Infy’s trajectory has bottomed out. An up-tick is imminent based on incremental growth from the fast reviving US BFS (banking and financial services) segment, which was Europe-led earlier, scalability and momentum in top 11-25 accounts which account for 16.1 per cent of revenue is growing at 1.6 time the rest of the business in the first three quarters of FY18.”
They said the 'strategy-refresh' is working for the company, “with account hunting, higher investments in platforms and a better execution engine (deeper automation impact) and higher digital composition in key service lines.” Improved hiring in the US, the analysts said, will mitigate legislative adversity for Infosys. Moreover, the stock is trading at 20 per cent discount to TCS compared to historical average of 9 to 15 per cent.
“Our multiple upgrades are based on our belief that the worst is behind for Infosys. The Nilekani-Parekh repair team is likely to deliver, helped by business tailwinds,” they said.
Nasscom has guided for IT services exports growth of 7 to 9 per cent in constant currency for FY2019 as against 7 per cent likely to be achieved in FY2018.
“We believe that FY2019 growth will be better than FY2018 though not as steep as the street is building in estimates. Our recommendation bias is towards companies that have low implied growth acceleration baked into stock prices; Infosys and Tech Mahindra fit the bill,” Kawaljeet Saluja and Jaykumar Doshi, analysts, Kotak Institutional Equities said on the Nasscom projections.
“We expect modest acceleration in growth rates in FY2019. A strong economy across key markets, low unemployment in the US, rising interest rates and an environment supporting growth for IT spends in the banking vertical bodes well for Indian IT,” they said.