Global banks are planning to spend big on technology based on customers' expectations. There’s been a rise in the banking, financial services and insurance (BFSI) sector spending and this bodes well for the Indian IT companies. To discuss this, CNBC-TV18 spoke to Sandip Agarwal, Research Analyst, Institutional Equities, Edelweiss Securities, and Amit Chandra, Research Analyst- IT, HDFC Securities.
Agarwal affirmed that banking transactions are rising, which in turn is forcing companies to spend on cloud and agile operations. He also believes that the recent flurry of bank spending is driven to counter fintech disruptions.
He said, “The small and mid-sized banks in Europe and US are trying to aggressively counter the fintech disruption strategy and that’s one of the reasons why spends are coming. Also, within the BFSI, insurance is one segment where a lot of money is spent on the upgrades.”
Citing his top picks in the IT sector, he said that he likes HCL Technologies, Infosys and TCS. “In the largecaps, we like HCL Tech, Infosys and TCS. In the midcaps, we like Coforge, Mindtree, Larsen & Toubro Infotech (LTI) and in smallcaps, we like Birlasoft, Firstsource Solutions and Zensar Technologies, but I would reiterate that I don’t dislike any names; these are the preferred picks. In my view, all the stocks will do well, we are just at the beginning of the cycle and one will see a lot of money coming in tech spend side,” said Agarwal.
Meanwhile, Chandra pointed out that the chances of a further upgrade in IT valuations are limited from hereon. His preferred pick among the largecap players in the IT sector is Infosys.
He said, “From here on, the chances of further upgrade in multiples is limited, but the focus now will shift on how the FY23 and FY24 numbers will shape up and how the commentary of IT companies for FY23 is going to be.”
“In terms of preferred pick, in the largecaps, Infosys is the one which we like and apart from that Tech Mahindra is another one,” said Chandra.
For the entire discussion, watch the accompanying video