How much positivity in IT stocks is already priced in? Apurva Prasad answers

economictimes.indiatimes.com:

Apurva Prasad, VP-Institutional Equity Research, HDFC Securities, says “what is important is some line of path in terms of the operational performance. Most of the companies, including the larger ones, have real prospects of margin improvement. Many of them have held onto margins despite losing the revenue, companies that have lost 10%, 12%, a quarterly run rate basis, they managed to hold on for different set of reasons. But the fact is with some growth that is expected to normalize, prospects on margins continue to look fairly good.”

You belong to the bull case but I want to understand that in the last two months, from the peak of pessimism, the IT pack in various proportions, depending on which stock we are talking about, has moved up. How much of the positivity in your view or improved outlook is in the price and do you see more discounting going forward?
Apurva Prasad: I think a lot of it is in the price, especially the last few months with the multiples, the rate at which it has gone up, means PE multiples are up almost 20-25%.

A big part of the recovery or anticipation of recovery in the next couple of quarters is probably the price. But what is also important is some line of path in terms of the operational performance.

Most of the companies, including the larger ones, have real prospects of margin improvement. Many of them have held onto margins despite losing the revenue, companies that have lost 10%, 12%, a quarterly run rate basis, they managed to hold on for different set of reasons.