It's that time of the year when investors start taking stock of their portfolios to book profits in outperformers and weed out the ones that have not met expectations. This year, investors with midcap or smallcap stocks in their portfolios are likely to be better off than those with large cap, blue-chip stocks.
Even in the IT sector, it's a midcap that has comfortably beaten its much bigger peers such as Accenture, Cognizant, Tata Consultancy Services, Infosys and Wipro. The nearly 75 per cent gain in Noida-based NIIT Technologies (market cap Rs 3,600 crore) is also the best for any global IT stock since March 2015, according to Bloomberg.
"The (NIIT Tech) shares are up 74 per cent from a March 25 low, the most in Bloomberg Intelligence's Global IT Services Commercial Competitive Peers index," according to this report.
Over the same period, TCS has corrected 6.3 per cent, Infosys 5 per cent, while the IT sub-index of the Bombay Stock Exchange has shed 7.1 per cent.
The biggest reason for NIIT Tech's outperformance is the company's decision to cut back on government projects, which often run into delays and impact margins.
"One of the reasons why you're seeing our stock price running up is because we've started de-focusing on these large programs and shifted our energies to global markets. Our margins improved dramatically," NIIT Tech's Chief Executive Officer Arvind Thakur told Bloomberg.
In the September quarter, NIIT Tech cut back its India exposure by 12.4 per cent quarter-on-quarter. The company is now focusing on the high-margin digital space.
IDFC Securities expects NIIT Tech's margin to expand by 270 basis points over FY15-18E from 17.6 per cent at the end of the September quarter.
"The renewed focus on a select few services and verticals, along with a revamped account management framework, have improved the revenue visibility of NIIT Tech. We see steady improvement in margins along with stronger revenue growth trajectory in FY15-18E," said IDFC in an October note.
The brokerage has an "outperform" rating on the stock.
On Friday, NIIT Tech shares closed 0.24 per cent higher at Rs 591.20 as compared to 0.95 per cent loss in the broader Nifty.
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