Deal wins shown by large-caps indicate a big shift in the technology space, said Nilesh Shah, MD & CEO of Envision Capital, on Thursday.
Speaking to CNBC-TV18, Shah said, “The technology space is on the cusp of a new wave of demand which is emerging. Deal wins shown by large-caps indicates that there is a big shift happening in the technology space, adoption is getting more widespread especially from the enterprises and that is going to be driving significant secular demand for technology services companies over the next few quarters and years.”
Talking about stock-specific action, Shah said, “The demand is great but these companies are yet to get into a double-digit demand and margins have been extremely good because of some tailwinds that they have enjoyed during the COVID era and currency-related tailwinds.”
HCL Tech and Wipro’s valuations are relatively reasonable and can outperform both TCS and Infosys going forward, Shah said.
“However, valuations, the PE multiples are in the 30s for both Infosys and TCS. So incremental capital need not be allocated to these kinds of stocks and at this stage and probably there could be some correction along the way. The other large-cap companies like HCL Technologies which we own and Wipro, for both these companies the valuations are relatively reasonable and if both these companies get their capital efficiency right then maybe as stocks they have a potential to outperform both TCS and Infosys going forward,” he said.
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