Motilal Oswal: India’s IT Sector Stands Out; Making A Bigger Overweight In Model Portfolio
A pre-Covid photograph of the Tata Consultancy Services Ltd. (TCS) campus in the State Industries Promotion Corporation of Tamil Nadu Ltd. (SIPCOT) IT Park in Chennai. (Photographer: Dhiraj Singh/Bloomberg)

Motilal Oswal: India’s IT Sector Stands Out; Making A Bigger Overweight In Model Portfolio

BQ Blue’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages. These reports offer BloombergQuint’s subscribers an opportunity to expand their understanding of companies, sectors and the economy.

Motilal Oswal Report

Q1 FY21 corporate earnings have begun with several IT firms exceeding our expectations, in turn resulting in material earnings upgrades. Key positives include healthy deal wins, a robust deal pipeline and better-than-expected guidance for FY21. This has driven 12-14% earnings upgrade for Infosys, HCL Tech and Wipro.

IT offers relative earnings comfort coupled with solid balance sheet, cash flow, Return on Equity (RoE) and payout metrics in such current volatile and disruptive times. Tier-I IT companies have best in class balance sheets, resilient business models and excellent management pedigree and yet valuations are not expensive. We expect the IT sector’s relative earnings outperformance to sustain for the rest of FY21. Also, the relative growth divergence verses other sectors should support re-rating of the IT sector. Thus, we have further increased our allocations to the IT sector and added 100bp to Infosys, and introduced Wipro in our model portfolio. We have funded this by trimming our positions in Utilities.

Click on the attachment to read the full report:

Motilal Oswal - India Strategy-IT.pdf

DISCLAIMER

This report is authored by an external party. BloombergQuint does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the brokerage and do not represent the views of BloombergQuint.

Users have no license to copy, modify, or distribute the content without permission of the Original Owner.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.