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HDFC Securities Institutional Equities
In this note, we decode the signal from noise and probe some key questions:
How structural is the demand and how correlated is it to the macros (top-down assessment)?
Can the inflationary pressure on enterprises accelerate tech spend (enterprise trends – growth vectors)?
What's leading to growth visibility beyond CY22 (cloud partnerships–the second order impact)?
What led to the multiple reset and what's in the price (mean reversion ‘favorable' outcome).
We believe that there's high probability of double-digit growth outcome in the medium term and the structural drivers more than offset any macro variability.
Risk-reward is favorable for tier-1 IT as current valuations imply a modest growth ask-rate; at the same time, mid-tier IT will sustain its growth premium. We have a constructive stance on the sector.
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