'Growth will depend on macro environment'

Top-rung companies in the IT services sector seem to be poised to take advantage of the strong demand on the back of increasing offshoring.

We expect margins to come down over the medium to long term. While billing rates have not started to move up significantly, better mix of revenues, geography and customers may help average pricing.

Large companies are well placed in terms of scalability of operations and attracting fresh talent.

Effective cost management and the movement of the rupee will be key to revenues. Firms with sustainable business models will prevail irrespective of market cap.

How do you expect IT sector to fare in comparison with other segments?

It is difficult to compare different sectors given the varying dynamics. The IT services sector is less dependent on the domestic economy.

It is growing at a higher rate and has the potential to outperform the broad markets. But a lot will depend on the macro-economic environment and developments in other sectors. The strengthening rupee will be a concern.

A substantial chunk of your portfolio lies in Infosys. Does this not increase risk?

Front-line firms have fewer execution problems and we do not want to dilute the portfolio's quality by adding firms that are exposed to risks.

The scheme is benchmarked against the BSE IT Index and its exposure to Infosys is lower than the weight of the stock in the index.

Though there are a large number of stocks available in the IT sector, the fund has just 12-15 scrips on an average. What is the rationale behind this strategy?

We prefer quality companies that are positioned to take advantage of the global offshoring trend.

We see our clients that follow multi-vendor strategies consolidating their outsourcing business and provide larger share of business to few partners. Exposure to quality firms lessens risk and leads to better risk-adjusted returns.