Mid-Cap IT Space Has Potential To See Growth, Says Analyst
Due to IT spends and the present uncertainty, most companies in the sector will see muted growth in the short term, according to this analyst.
With most IT majors announcing muted results, analysts expect the sector to continue to show subdued performance in the short term. However, at the same time, mid-cap IT companies are expected to report growth in their domain.
"Mid-cap IT is an interesting space to be in. So, some of them are actually seeing good growth in their specific domain areas. And, once spending does come back, I would believe that mid-cap IT would probably do better than large-cap IT, as the IT spend comes back in the initial phase," Nitin Raheja, executive director and head of discretionary equities at Julius Baer, told NDTV Profit.
Due to IT spending and the present uncertainty, most companies in the sector will see muted growth in the short term, Raheja said. While the order wins were robust, there were deferments too, as he highlighted.
On Friday, the NSE Nifty 50 settled 150.40 points, or 0.67%, lower at 22,419.95, and the S&P Sensex declined 609.28 points, or 0.82%, to end at 73,730.16.
On Tech Mahindra
Tech Mahindra, which missed analysts' estimates, gained over 7% on Friday. According to Raheja, this could be due to "hope trade," as new management is sharing its vision.
However, G Chokkalingam, founder and managing director of Equinomics Research, said, "I have respect for whatever they say. Despite that, I have doubts." According to him, the company's growth is below its peers, and he finds "it very difficult to accept this level of confidence" despite the low growth.
JM Financial Services's Equity Derivatives Analyst Soni Patnaik concurred and said, "Avoid buying and wait for the resistance to cross."
In terms of banking, Raheja said that the private banking sector is cheap and next year, the space could do well. He added that the tier-II banks, with better valuations, have performed well and the trend of narrowing the valuation gap will continue in the coming year.
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