Infosys, TCS top picks: Sudip Bandyopadhyay

You can expect steady and stable return from all top-tier Indian IT companies, says Sudip Bandyopadhyay of Inditrade Capital. He says investors can look at Infosys and TCS even at current levels. Edited excerpts: Does it appear that there is further headroom for growth in IT stocks?Indian IT is going through a structural re-rating. Probably, the growth which Indian IT would have seen in the next five-seven years is getting frontloaded now. Covid has accelerated the growth path for Indian IT companies. The body language of top management of IT companies has changed. Their commentary about the future and everything around their business growth opportunity is very optimistic. The results are showing what is happening on the ground. A significant vendor consolidation is happening at the user end and that is an advantage for large Indian IT companies. Instead of having multiple vendors providing multiple services, large corporates, particularly in the US, are looking at consolidating vendors. The digital transition, which people were expecting to happen over a period of time, has accelerated. The work from home culture has ensured that digital transformation happens very fast. The winning of Democrats in the US elections is also going to help. The expectation on visa front is a reason to cheer for IT companies. Overall, it is an excellent scenario for IT companies.At this stage, somebody buying into IT can expect steady and stable return from all top-tier Indian IT companies. Even midcap IT companies like MindTree, Mphasis or L&T Technology are looking very good. There is absolutely no problem in buying largecap IT companies like Infosys and TCS even at current levels. HCL Tech and Wipro are also improving and they have their unique strengths. So top four IT companies can be picked up for your portfolio.Where do you see the opportunity in PSU banks?SBI has been my top pick in this PSU basket for quite some time. We had a target of Rs 450 on SBI. As far as other banks are concerned, I will be a little conservative. Other PSU banks are not that confident about asset quality. If somebody is taking a medium to long-term view, then PNB and Canara Bank look good. There is definitely value at these prices but you may have to navigate through a choppy period when the next quarter results come.What about disinvestment theme?There are many PSUs which are definitely worth nibbling in. There are some PSUs which can be looked at especially with the privatisation angle in mind. Whether privatisation happens or not, some PSUs are anyways doing well and they can be looked at current valuations. Mazagon Dock is a fantastic company. The stock has been trading within a particular range ever since its IPO came about a year-and-a-half back. It can be picked up at current levels. The strong balance sheet, lot of cash, focus on make in India helps the company get orders. It has a strong order book. Similarly, Bharat Electronics has the same theme.BPCL is also a good company. The government has done what it needed to do. They have cleaned up the treasury stock part. At some stage the disinvestment will happen. But even without disinvestment, this is definitely a Rs 550 plus stock and can be looked at even at current levels. They are maintaining the dividend policy, which is good for investors. But if you are looking at the next one year, investors buying today will benefit.The price action is indicating that the market wants to vote for growth and not value. So which way should one go?You should look for value at this stage. The market has moved up quite a bit. There is absolutely no doubt that some of the stocks are looking fully valued. And on the other hand, there are a lot of interesting stocks which are definitely attractive value wise. So my vote will be towards value. I have been a buyer in SBI and I have been recommending it. I have also been a buyer in L&T and some deep value stocks which will inevitably give investors good returns over a period of time. I am not sure what will happen in the next 15-30 days but if you are going to hold these for a slightly longer duration, the value play will reward investors.

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