Friday, February 8, 2008

Expect 25% return from IT stocks

Investment Advisor SP Tulsian is of the view that one can expect 25% return from IT stocks.
Tulsian told CNBC-TV18, "The best part about the IT companies that whatever fear had on account of the Rupee strengthening, seems to be going away and you do not expect a fall of more than 3% on a nearly basis. We have seen some of the employees being removed by the TCS for non-performance, so there were negative sentiments for a couple of days. They have reached at a valuation where one can definitely take a call; they are rolling virtually at a PE multiples close to 13-14-15. The front line IT stocks like Infosys, Wipro, TCS, or HCL Technologies at these levels looking quite attractive."

He further added, "One definitely can’t say that the IT sector has really gone into the dump; they will keep showing the growth. The margins may take a shrink probably but ultimately the increase in the top line will recoup that and secondly, the slowdown could have two effects, you may witness higher outsourcing by the US companies to control their cost also. So I am taking a positive call here on the IT sector because you need to be very choosy, you need to see the downside, whether it’s likely to happen in any of the sector, which is not visible at least in the IT sectors from here on and you have more upside seen from these levels. So HCL definitely qualifies at these levels available at a historical PE multiple of close to about 15 times. On an annualized basis, we can expect a return of about 25% safe to assume that. On the higher side, if the market also starts contributing positively over all, the returns may go as high as 35% also."

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