IT shares in focus; Wipro, Mindtree, Persistent, Mphasis at new highs

TCS was quoting higher for the fifth straight day, gaining 5% during the period, as compared to 3% rise in the benchmark indices

Shares of information technology (IT) companies were in focus in an otherwise subdued market on Wednesday with eight stocks from the S&P BSE IT index – Wipro, Birlasoft, Coforge, Firstsource Solutions, Mindtree, Persistent Systems and Sonata Software – hitting their respective record highs on the BSE in the intra-day trade today. Tata Consultancy Services (TCS), Tech Mahindra, Infosys, HCL Technologies and Larsen & Tourbo Infotech from the BSE IT and Nifty IT indices were up in the range of 1 per cent to 3 per cent.

At 10:13 am, the S&P BSE IT Index (up 1.2 per cent) and Nifty IT index (up 1.5 per cent) outperformed the market as compared to a marginal 0.02 per cent and 0.09 per cent gain in the S&P BSE Sensex and Nifty50 index, respectively.

Among individual stocks, Birlasoft hit a new high of Rs 341.80 in the intra-day trade today, having rallied 27 per cent in four days, after the company's dollar revenue increased 3.2 per cent quarter on quarter to $123.3 million in March quarter (Q4FY21) mainly led by healthy growth across verticals. Birlasoft has significantly improved its annuity revenues from 60 per cent in FY20 to 70 per cent in FY21.

Going forward, analysts at ICICI Securities expect the company to continue to improve annuity revenues, cross sell to clients and focus on niche verticals.

"This, coupled with Birlasoft’s focus on client mining (top 20 accounts up around 18 per cent year on year in FY21), expansion in Europe & APAC, improving growth in top 30 accounts, healthy deal pipeline (up from $600 million to $1.2 billion), healthy order book (healthy mix of mid-size deal with potential to be growth drivers), increase in deal sizes, project ramp ups, reversal of discounts, focused ERP channel sales (with higher focus on cross selling digital) and anticipated higher net new growth (due to opening of US & Europe), bode well for revenue growth in coming years," the brokerage firm said in a result update.

Shares of Mindtree, too, hit a record high of Rs 2,316.35, up 5 per cent in the intra-day trade after the management reiterated its 4x4x4 strategy, with a focus on four industry groups, four service lines, and four geographies.

"At the company’s Analyst Day, the management displayed confidence of delivering both on the growth and the profitability front. It maintained its guidance of double-digit industry-leading growth and Ebitda (earnings before interest, taxes, depreciation, and amortisation) margin of over 20 per cent, despite additional investments," Motilal Oswal Financial Services said in company update.

The brokerage added: A stable outlook for the top account, decent deal signings, and the ability to sustain improved margin are key positives along with consistent margin expansion. That said, higher exposure to the Travel, Transport, and Hospitality segments remain a drag on overall recovery. It has maintain its 'Neutral' rating on the stock.

That apart, sector giant TCS was up 2 per cent to Rs 3,218 on the BSE. The stock was trading higher for the fifth straight day and was up 5 per cent during the period as compared to a 3 cent gain in the benchmark indices.

 "TCS sees immense opportunities for growth, riding the new technology cycle that has kicked off, powered by the belief that it’s differentiated capabilities and collaborative, solution-centric approach makes it the preferred transformation partner of its customers," N Chandrasekaran, chairman of TCS, said in a letter to shareholders last week.

Rajesh Gopinathan, CEO and MD, said the company is entering FY22 with strong growth momentum and much better visibility for future growth than last year, powered by a strong order book and a robust deal pipeline. CLICK HERE TO READ FULL REPORT