Mutual funds raise stake in TCS, Infosys, 2 other IT stocks; FIIs cut. Who's smart?
quarter earnings season in which IT majors managed to beat Street expectations led by significant improvements in the BFSI sector, mutual fund managers were smart enough to buy IT stocks even as FIIs sold.
June quarter shareholding pattern shows that MFs raised stake in Infosys by 116 bps to 19.09%. The stock is up around 20% in the last one month.
Similarly, MF ownership in Tech Mahindra went up 127 bps to 15.27%, in HCL Tech by 54 bps to 8.53% and in TCS by 20 bps to 4.25%.
FIIs, on the other hand, didn't look convinced that the IT sector is on the verge of bottoming out. During the quarter, foreign investors pared stake in 5 out of top 6 IT companies, barring Wipro.
Incidentally, Wipro is among the worst performing IT stocks in the last one month as it is up only about 2%. FII holding went down by 120 bps in HCL Tech, 137 bps in Infosys and 88 bps in case of Tech Mahindra.
In Q1, largecap IT companies delivered better-than-expected results, showing improvements in margins whereas midcaps have missed the earnings estimate so far with expensive valuation compared to largecaps.
«The Indian IT companies are focusing on improving operating profits by cost optimisation measures with a strong traction in deal wins. Overall, our stance remains positive for the sector in the future. Although current valuations are premium compared to the 5-year average fwd PE, recovery signs in BFSI and emergence of AI and gen AI are the future revenue visibility, supporting stay investing in the IT sector,» Vinod TP, Research
