IT midcap companies such as LTIMindtree and Persistent Systems said they are increasingly getting an opportunity to bid for bigger deals due to their strong execution. This was only open to large caps in the past. Experts said that while sectors like BFSI and hitech are down currently, there is good demand from healthcare and life sciences, manufacturing, and ER&D where the mid-tier companies have a good play.
It is close to two years that IT sector has been getting all the negative reviews from analysts. But there are some IT midcaps where the business is not just servicing big clients but operating in niche areas who have got ignored. However, now a divergence is appearing. While Infy might have cracked after its Q2 result, some midcaps and smallcaps witnessed a sharp rise post their result. It is probably time to take a look at each company separately rather than taking a call on the overall sector.
“For some more time, this whole thing can play out that the giant stocks which are very well owned, the large banks may not do well and the smaller ones will keep doing well. For a player who is not very momentum or trade-oriented, it makes sense that some of the profits made out of a lot of other small and midcaps, can be parked in the large banks because there is safety and potential for 30-40% returns.”
“The market today is chasing growth and irrespective of the fact whether it is a midcap or a smallcap, the market is ready to pay them even premium to largecaps. That is typical of a very broad-based rally which is playing out and IT is not very different over here.”
While larger players are conserving resources and maintaining a cautious approach to hiring due to macroeconomic uncertainties, midcaps are focusing on bringing in more freshers to balance out employee costs.