IT upcycle has just begun; Mindtree, L&T Infotech to do much better, says Edelweiss Securities' Sandip Agarwal

IT stocks will do much better from here and the tech upcycle will last 4-5 years, said Edelweiss Securities’ Sandip Agarwal on Thursday, while adding that we are only 10-20 percent into the IT upcycle.

“The broad call is that this cycle is an upcycle and it’s a very big upcycle,” Agarwal told CNBC-TV18.

IT gauge, Nifty IT index has returned over 50 percent in the last one year, while the year-to-date (YTD) return is above 30 percent.

He also said that Mindtree and L&T Infotech will deliver strong returns.

“I believe Mindtree and Larsen & Toubro Infotech will deliver the same shareholder return as what Infosys and TCS have,” Agarwal added.

MindTree shares quoted at Rs 4,834 apiece, up 11 percent on NSE at 12.31 pm on Thursday. The stock has gained 192 percent YTD, while the five-year return on the stock is 866 percent. L&T Infotech quoted at Rs 6,167.10 per share, rising 3.6 percent at 12.32 pm. It has gained 66 percent YTD and the five-year return on the stock is 912 percent.

In comparison, Infosys shares surged 1.36 percent on Thursday at 12.34 pm, quoting at Rs 1,731.50 apiece, while TCS quoted at Rs 3,622.95 per share, down 0.89 percent.

Infosys has gained 37 percent this year so far, while the five-year return on the stock is 237 percent. So far this year, TCS has eked out over 23 percent in gains, while the five-year return on the stock is at 206 percent.

“We are just 10-20 percent into the upcycle and another 70-80 percent is there and people, at whatever level they buy, will make tons of money unless there is a management issue,” Agarwal added.

IT stocks will do much better from here and the tech upcycle will last 4-5 years.

“We have an upcycle of 4-5 years, so there is no reason to think that the stocks are expensive because the stocks will do much better from here and the multiples will always look higher,” he said.