After being cautious on the IT sector, Jefferies has turned positive on the sector, calling it a ‘defensive’. Following are the five reasons why the broking firm feels Infosys needs to be upgraded to a ‘Buy’
1. The stock has underperformed the Indian market by 22 per cent. Valuations are now reasonable to upgrade it to a ‘Buy’
2. The stock is at a steep 20 per cent discount to TCS. It is time to build up a position in Infosys with a long term perspective. While Infosys is preferred over Wipro, TCS could be at most risk given the high expectation and valuation.
3. Unlike the financial meltdown in 2008-09, issues this time around are more sovereign in nature. Though global economies are expected to remain uncertain for some time, corporate can not delay their spends indefinitely.
4. Indian economy is going through its own challenges. In this context, Indian IT can be a good defensive play for investors as they are more leveraged to global macro, have better margin and return profiles. Plus their balance sheets are in good shape and now their valuations too are attractive.
5. Additionally, disclosures and corporate governance are the best in the sector, with Infosys leading the pack.