Discount on Dalal Street: These 3 large-cap IT stocks could be a good bet as prices plummet

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March 19, 2020 2:38 PM

The recent fall in share price has made a few large-cap IT stocks an attractive buy for investors.

Discounted valuations make these stocks an attractive buy for investors.

Bears have taken over the equity markets this year as global sell-off continues to batter stocks. In the free-fall that domestic equity benchmarks are witnessing, S&P BSE Sensex has tanked 30 per cent since the start of this year to sit slightly above the 28,000 mark, while the broader NSE Nifty-50 has dropped down 3,952 points or 32 per cent now below the 9,000 level .Amid this carnage on Dalal Street, share prices have taken a beating but analysts believe this is the time to shop equities. 

After pocketing decent gains in the last five years, the information technology (IT) sector is now bearing the brunt of exposure to verticals like oil, energy, banking and travel. As the spread of Coronavirus has led to lockdown in many geographies, travel is restricted which could impact the IT sector that sends its employees across the globe to work on projects. Along with that sizable deals will remain amiss, said ICICI Direct Research. While ICICI Direct says that the real impact on earnings is yet to be seen, “the recent correction in stock prices of IT companies have made a few stocks attractively placed. Hence, we maintain BUY on a few stocks led by attractive FCFF yield and upgrade the rating on a few stocks based on attractive valuation.”


Target price: 710

Currently trading at Rs 544 per share, down 26 per cent since the start of this year, Infosys looks like an attractive bet. “The company has seen healthy growth in large deals and has witnessed industry leading growth led by a change in management. Infosys may face headwinds in the near term,” ICICI Direct said. Infosys according to the analysts is on the right path to growth. With an upside of 24 per cent, Infosys is a large-cap IT stock that investors can pick for healthy returns.


Target price: 235

Down 32 per cent since January 1, Wipro is now trading at an attractive price of Rs 168 per share. The IT giant has high exposure to banking and finance sector, energy and the Middle East, however, ICICI Direct says that the current valuation has factored in most negatives. Although the target price for the stock has been revised from Rs 285 to Rs 235 but with a 29 per cent upside, Wipro could still be a good pick.

Tech Mahindra

Target price: 760

Now at a discounted price of Rs 554 per share, Tech Mahindra is one of those IT companies with the least exposure to impacted verticals, helping the company to reduce repercussions. “The company is trading at an attractive valuation, which prompts us to maintain BUY rating on the stock. The downward revision in target price is mainly due to near term headwinds of travel restrictions, Europe and China exposure,” said ICICI Direct. An upside of 24.6 per cent on Tech Mahindra would see it surge back up to where it was at the beginning of this year.

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