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Stocks of information technology companies, particularly frontline ones, could face bouts of profit booking next week after sharp gains this week. Lack of any positive triggers may keep any upside in these shares capped. Also, data on rollover of positions to the December derivatives series from the November series does not paint a bright picture for stocks of the sector. At 72%, rollovers in the information technology sector were the lowest among sectors. Rollovers in Tata Consultancy Services and Wipro were rather low at 61% and 63%, respectively.
From a long-term perspective, market participants hold a positive view on Infosys shares as the valuation of the stock is low compared with peers such as Tata Consultancy. We believe convergence of growth with peer levels over the next few quarters will narrow Infosys's valuation discount to previous business cycle mean/that of peers.
