According to Rahul Singh, chief investment officer at Tata Mutual Fund said that information technology companies are expected to deliver high single-digit revenue growth even if macro issues such as liquidity crunch and economic slowdown become worse.
Singh told, “IT services are like a hedge to have in your portfolio in case economic growth does not pick up and domestic cyclical sectors do not do well. The consequence of rupee depreciation is a tailwind (for IT companies) if crisis-hit non-banking financial companies become a systemic problem.” Rupee going down is beneficial for IT companies as they bill a majority of their American and global clients in U.S. dollars.
India’s GDP growth slowed further to 5.8 percent in the January-March quarter as consumption and investment in the economy weakened.
Rahul also added, “IT stocks delivering high single-digit growth are in the bag helped by buybacks and not necessarily by margin expansion. Also, their valuations are at higher-end of their historical range but not terribly expensive as of now.”