Book profits on four blue chip IT stocks, buy at lower levels

The benchmark indices, Sensex and the Nifty, collapsed under huge selling pressure for the sixth trading session on Friday last by foreign funds. Intraday, the 30 share BSE Sensex swung by 1263 points, ultimately closing 588 points to finish at 46,285, while the NSE Nifty lost 182 points to settle at 13634 levels. The Sensex and Nifty have lost 7.04% and 6.89% respectively during the last six trading sessions. The economic survey 2020-21 presented by the Finance Minister ahead of the Union Budget projected a 11% growth for the next financial year as the Indian economy makes a V-shaped recovery after witnessing a pandemic led carnage. But it failed to cheer the sentiment as investors were concerned on weakening global trend and slow economic recovery. While the pandemic has triggered a huge push towards digitisation, it is no surprise that IT companies have performed quite well. A temperature check on the large four IT stocks show that they have done very well on all fronts. Infosys posted a 16.6% rise in its consolidated net profit at Rs 5,197 crore for the December 2020 quarter as against Rs 4,457 crore in the year ago period. Revenue grew 12.3% to Rs 25927 crore as against Rs 23092 crore for the same quarter of last fiscal. The company increased its FY21 revenue growth forecast to 4.5 to 5% from its previous guidance of 2-3% growth buoyed by strong performance. HCL technologies achieved an impressive milestone in its history by crossing $10 billion in revenue for the current year 2020 and posting a 31% rise in net profit to Rs 3,982 crore for the third quarter ended December 2020 compared to Rs 3,037 crore for the corresponding period of the previous year. On the other hand, revenue grew by 6.4% to Rs 19,302 crore as against Rs 18,135 crore in the same period of 2019. IT services major Wipro posted a 21% jump in net profit at Rs 2968 crore for the December 2020 quarter as against Rs 2455 crore for the same year ago period and revenues grew 1.3% to Rs 15670 crores for the quarter ended December 2020 period. IT behemoth TCS also posted its strongest third quarter growth in 9 years with net profit rising to Rs 8727 crore by 7.1% , while revenue rising by 5.4% at Rs 42015 crore against the same quarter of last fiscal. The company gave a double digit guidance growth for the FY22. The December 2020 quarter revenue of TCS is around 70% of the combined revenue of Infosys, Wipro and HCL Tech. The constant currency revenue growth has been on an upward trajectory for Infosys at 5.3%, 4.1% for TCS, 3.4% for Wipro and 3.5% for HCL Tech. Broadly speaking, all the four IT companies have done well with Infosys showing a higher growth rate, TCS growing in size and margins, Wipro reflecting best ever margins while HCL Tech adopting a differentiated business strategy. Investors holding on to the four blue chip IT stocks can book profits at present levels and buy at lower levels in the next 8-10 weeks time frame when opportunity arises.
Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.