As I mentioned earlier, P/E ratios of most of the IT stocks have reduced now close to their Fair Value.
TCS PE has corrected from 40 to 27.
Infosys PE has corrected from 38 to 22.
HCL TECH PE has corrected from 31 to 19.
To me, this looks close to Intrinsic Value of the stocks, based on Median P/E for the past 10+ years. Reversion to Mean has happened to a large extent.
We will now see most of the analysts talking negative about all these IT companies, and this will give an opportunity to long term IT investors to take major exposure to IT stocks.
Some further correction may happen in all these large cap IT stocks since weakness in North America and Europe markets will continue for 2-3 more quarters, as per my experience.
If an investor follows value investing approach, it mostly works in IT sector, as PE improvement also can happen once inflation in all the developed nations start falling, and also in India. Margins may also improve partially but real gains can come from sales and PAT improvement after few quarters.
Disclosure: This is not a recommendation or an advice. This is just based on my observations of IT sector over past 3 decades.
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