Infosys, Wipro, HCL Tech, TechM: Insurance companies raise stakes in 4 IT firms to record levels

Despite concerns over diminishing earnings visibility that the IT sector is historically known for, insurance companies have raised their holdings in Tier 1 IT names such as Infosys Ltd, Wipro Ltd, HCL Technologies Ltd and Tech Mahindra Ltd (TechM) to record high levels in the June quarter. June was the sixth straight quarter when insurers upped stakes Tata Consultancy Services. All this, when IT guidance have been cuts for the year globally amid delayed decision making by clients.

In Infosys, stakes of insurance companies hit a record high of 13.64 per cent in the June quarter. These institutional investors increased holdings in the second-largest IT firm for seven straight quarters, AceEquity data suggested. Similar was the case with HCL Tech, where insurance companies upped stakes for 10 straight quarters to a record level of 6.53 per cent in the June quarter.

Stake of insurance companies in Wipro at 5.01 per cent was at record high level, and so was in TechM at 12.55 per cent.

In the case of largest IT player, TCS, insurance companies upped stakes for the sixth straight quarter. They held 5.74 per cent stake in TCS in June quarter against 5.57 per cent in March, 5.44 per cent in December 2022, 5.13 per cent in September 2022, 4.88 per cent in June 2022, 4.48 per cent in March 2022 and 4.46 per cent in December 2021 quarter, data compiled from corporate database AceEquity suggests.

Insurance companies held 6.01 per cent stake in TCS in September quarter of 2011.

Besides, insurers' faith in IT names, June quarter turned out to be weaker-than-expected across growth and margins. Disappointments were sharp in a few companies such as Tech Mahindra and HCL Tech.

Infosys cut guidance despite in-line performance signalling modest near-term outlook.

"TCV was reasonable for many driven by large and mega deals. Financial services and telecom were the pain points. Recovery in growth is contingent on financial services, earliest indicator of which will be visible by end of the year (in case of budget flush) or early next year. Growth will be influenced by large and mega deal ramp-up. Stock performance has been volatile capturing hopes of bottoming out versus reality of weak performance. Infosys is our best bet followed by HCL Tech," Kotak said in a note.

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