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

Benchmarks Sensex and the Nifty tumbled under huge selling pressure for the sixth trading session last Friday by overseas funds. During the day, the 30-stock BSE Sensex climbed 1263 points, eventually closing 588 points to end at 46,285, while the NSE Nifty fell 182 points to settle at 13,634 levels. The Sensex and Nifty have lost 7.04% and 6.89% respectively over the past six trading sessions. The 2020-21 Economic Survey presented by the Finance Minister ahead of the Union Budget predicted 11% growth for the next fiscal year as the Indian economy experiences a V-shaped recovery after witnessing a carnage caused by a pandemic. But it failed to boost sentiment as investors worried about the weakening global trend and slow economic recovery. As the pandemic has sparked a huge push towards digitalization, it’s no surprise that IT companies have performed quite well. A temperature check on the big four computer stocks shows that they performed very well on all fronts. Infosys posted a 16.6% increase in its consolidated net profit to Rs 5,197 crore for the December 2020 quarter from Rs 4,457 crore a year ago. Revenue increased by 12.3% to Rs 25,927 crore from Rs 23,092 crore for the same quarter last fiscal year. The company raised its FY21 revenue growth forecast to 4.5-5% from its previous forecast of 2-3% growth, supported 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% increase 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 last year. On the other hand, revenue rose by 6.4% to Rs 19,302 crore from Rs 18,135 crore in the same period of 2019. IT services giant Wipro recorded a 21% increase in profit to Rs 2,968 crore for the quarter ended December 2020 from Rs 2,455 crore for the same period a year ago and revenue increased by 1.3% to Rs 15,670 crore for the quarter ended December 2020. The giant IT company TCS also recorded its strongest third-quarter growth in 9 years with net profit reaching Rs 8,727 crore by 7.1%, while revenue rose 5.4% to Rs 42,015 crore by compared to the same quarter of the previous year. The company reported double-digit growth for FY22. TCS’ December 2020 quarter revenue represents approximately 70% of the combined revenue of Infosys, Wipro and HCL Tech. Revenue growth in constant currency followed an upward trajectory for Infosys at 5.3%, 4.1% for TCS, 3.4% for Wipro and 3.5% for HCL Tech. Overall, the four IT companies performed well, with Infosys showing a higher growth rate, TCS increasing in size and margins, Wipro posting the best margins ever while HCL Tech is adopting a differentiated business strategy. Investors who hold on to the four blue chip computer stocks can take profits at current levels and buy at lower levels over the next 8-10 weeks when the opportunity arises.
Rajiv Kapoor is a Stock Broker, Certified Mutual Fund Expert and MDRT Insurance Agent.