We're in the middle of a tech revolution, not interested in timing IT stocks, says Saurabh Mukherjea

Nearly 70 percent of the Fortune 500 companies are yet to switch to the cloud, which offers a significant growth opportunity, the Marcellus founder and CIO has said

Marcellus Investment Managers founder and chief investment officer Saurabh Mukherjea.

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The IT segment’s performance in Q4 disappointed many on Dalal Street with several frontline tech companies reporting muted growth. However, considering a strong order book along with the enhanced business opportunities the artificial intelligence (AI) wave brings, companies will continue to perform well, Marcellus Investment Managers founder and CIO Saurabh Mukherjea has said.

Speaking to Moneycontrol, Mukherjea shared his insights on the performance of Indian IT companies and their prospects. Calling the negative stance of analysts on IT akin to an attempt to time steam engines in the midst of the industrial revolution, Mukherjea said, “We are in the middle of a tech revolution. If someone is trying to time IT stocks, you are welcome to try but I am not going to do that.”

Here are some of the factors Mukherjea said will play in favour of the IT industry in the long run:

Strong order books

Although analysts were underwhelmed by the performance of Tier-I stocks, with Infosys deeply disappointing markets, Mukherjea laid out the narrative and numbers posted by TCS as an affirmation of the strength and buoyancy in the business. Marcellus continues to hold TCS in its portfolios, said Mukherjea, noting there is no sign of a slowdown.

Also read: FIIs optimistic on India but dichotomy remains: UBS positively cautious on global investor outlook

“The deal wins of these companies continue to punch through record highs each year, including the last three months. We must note that in spite of the slowdown in the US, TCS announced a record deal,” he said.

In Q4FY23, TCS reported a flat EBIT margin of 24.5 percent, but the order book remained strong with a TCV win of$10 billion, up 28.2% QoQ.

Migration to the cloud

Referring to a finding by global IT major Accenture, Mukherjea pointed out that nearly 70 percent of the Fortune 500 companies are yet to switch to the cloud, which posed a significant growth opportunity.

Migration to the cloud for seamless data accessibility is a prerequisite for enhanced AI usage in tech businesses. “You cannot benefit from Generative AI as a corporation if you don’t move your kit to the cloud.”

According to Mukherjea, this prerequisite can play to the benefit of Indian IT firms which can enable this migration as and when the US-based companies increase their spending on IT.

While speculating further on how tech firms will perform, Mukherjea cited market intelligence and data services provider International Data Corporation’s (IDC) forecast, which has raised its outlook for the Asia/Pacific region and the United States.

Contrary to major brokerages, IDC expects global IT and business services revenue to grow 5.7 percent year-on-year (YoY) in FY24. Stating that it wasn’t merely quarterly results but such larger metrics that he bases his decisions upon, Mukherjea said, “I fail to see where the slowdown is. So, at a time when people merely jump up and down over Q4 results ignoring other positives, it is a great opportunity for sensible investors to make money.”

Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.