Pessimism In IT Stocks is Overdone. Top Large-Cap & Mid-Cap stocks to buy now

InfoTech stocks are in the doldrums due to concerns that the margins are under pressure. The sector is down 24% on a YoY basis. This has made their valuations quite reasonable.



Edelweiss has issued a report stating that though a bulk of margin pressure is pending, margin pressure related concerns is already reflecting in guidance/commentary and has led to street estimates cut post-4QFY22 results. Therefore while revenue estimates were cut by 2-4% in most cases, the EPS estimates cut was up to 7-9%. This suggests that the price corrections are mostly done.

Based on valuation correction and expected likelihood broadly unchanged guidance/commentary in 1QFY23, Edelweiss has recommended a buy of Infosys (valuations corrected 26%, price by 18%) and TECHM (valuation down 38%, price - 32%) among large caps. Among mid-caps, the preferred picks are LTI (valuation -49%, price - 42%) and LTTS (valuation -33%, price -23%). It is also stated that given the volatile/uncertain scenario, large caps or large mid-caps should be preferred over small caps.



Click here to download the Edelweiss report on InfoTech sector