Laggard tech stocks a buy for Bajaj Allianz

  • 13th Jul, 2017
THE RECENT UNDERPERFORMANCE of Indian software stocks, once considered a bellwether of the overall market, is a glaring buy signal for Bajaj Allianz Life Insurance.  The S&P BSE Information Technology Index is the second-worst performer among 13 industry gauges compiled by BSE, weighed down by losses in names including Infosys and Tech Mahindra. 
In  contrast, India’s benchmark index has surged to a record.  “We prefer software stocks among defensive sectors such as pharmaceuticals and IT, as they have entered a ‘buy zone’ in terms of valuations after the recent correction,” said Sam-path Reddy, CIO at Bajaj Allianz, which manages R500 billion ($7.7 billion) of assets. The Bajaj Allianz ULIP Equity Growth Fund has returned 19% so far in 2017. Shares of Indian IT firms have been hurt by uncertainty about U S visas amid rising protectionist rhetoric. Investors have also been concerned about recent reports that founders at two of the top four providers were looking to sell their stakes. Some market players advise waiting for a clearer trend to emerge.  
“Investors must wait six-nine months for a decision on software exporters,” said Prasanth Prabhakaran, CEO at Mumbai-based Yes Seal -rities (India). Companies able to adapt more quickly to changes in the operating environment will be “good buys.” Bajaj Allianz’s Reddy recommends investing in the sector now, and sees profitability being maintained amid continued sales expansion.  “Return on capital employed on core business for these companies is still healthy and upwards of 2 5%, and even though the growth has slowed the potential for 5-10% growth is intact,” he said in an interview. 

Source : The Financial Express

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