An Attractive Defensive Play

Good deal pipeline and likely recovery in client spends by the year-end are positives for the IT major

VIVEK ANANTH

The market volatility caused by Covid-19 pandemic has led to many bluechip stocks correcting to attractive valuations.

Infosys fell to a low of ₹509 in the past few days, a level last seen two years ago, but has recovered since.

The market has priced in the weakness in revenue growth for FY2020-21 as many of the company’s clients, including Visa, Apple and Cisco, have either cut or revised down their revenue guidances.

This will have an impact on Infosys as some deals the company had bagged will now take longer to get operationalised.

The stock is now trading at a 12-month trailing price earnings multiple of 18 times, which is close to its three-year average price earnings multiple.

For a long-term investor willing to weather short-term volatility, the correction over the past month (of 12-odd per cent) offers a good opportunity to accumulate the stock over the coming months. The company also has a decent dividend yield of around 3 per cent.

Before Covid-19