Growth, margin uncertainty likely to impair recovery in IT stocks

Scaling up of new deals and lowering costs are imperative for the up to 33 per cent gains in share prices to sustain

The stocks of top IT companies, which were also hit following weak investor sentiment post Covid-19 outbreak, have bounced back sharply from their lows in March. Tata Consultancy Services, Infosys, HCL Technologies and Wipro have seen their share price gain between 23-33 per cent since March 23. Tech Mahindra (TechM) is up by just 10 per cent due to a relatively poor performance in March quarter (Q4). With this, most of these top IT stocks are now trading above or at par with their respective historical 1-year forward valuation mean (see graph).

While the recovery in these IT stocks is