Buy these 2 midcap IT stocks for up to 15% return in 3 months: ICICI Direct

As many quality stocks have undergone healthy correction and are available as a favourable risk-reward proposition, brokerage house ICICI Direct has picked two midcap IT stocks saying IT stocks have undergone healthy retracement within the structural up move. Picking Info Edge India and Birla Soft, the brokerage says these midcap IT stocks are expected to catch up with their large cap peers. It sees an upside of 14-15% in these two stocks from current levels.

"The demand environment continues to be strong for Indian IT companies, which reflects in the strong headcount additions for the companies i.e. headcount additions for 9MFY22 is even higher than their FY21 additions," it said.  

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The companies have already elevated their fresher hiring for FY22 and are planning to hire even more freshers in the next 12 months, which will ease pressure on attrition, said the brokerage. The companies have also been opening delivery centres in tier II and tier III cities in India to increase their catchment areas as well as to facilitate hybrid working model, which will also help in employee stickiness in the long term and is expected to ease attrition pressure.  

Info Edge India | Target Price: Rs 5380

The stock has undergone healthy retracement over the past five months after witnessing relative outperformance during CY 20-21. It is seen resuming its primary up trend after a higher base formation near the long term 100 week’s EMA.  

Info Edge provides internet-based service delivery like recruitment services (Naukri), real estate (99 acres), Jeevansaathi and Shiksha. It is a Quasi play on Indian start up like Zomato, PolicyBazaar, Shoekonect, Ustra, Gramophone and job market, matrimony services & real estate market.  

The brokerage maintained a buy rating with target price of Rs 5380 per share in three months, which translates into an upside of nearly 14% on March 22 closing price of Rs 4759.85 a share on the BSE.  

"We expect the stock to head higher towards our target of Rs 5380 in the coming months as it is the 80% retracement of the last leg of the decline ( Rs 5761-4209)," it said.  

Birla Soft | Target Price: Rs 524

The stock after a stupendous rally of CY’21 has witnessed profit booking in the first two month of the current year. Currently, buying demand is seen emerging from the major support area of Rs 410-430 being the confluence of the rising 52 weeks EMA and the lower band of the previous major consolidation area of July-October 2021 as can be seen in the adjacent chart thus signalling a favourable risk-reward set up

Recommending to buy in the range of Rs 448 to Rs 465, ICICI Direct sees a target price of Rs 524 a share in three months. It comes out about 15% on March 22 closing price of Rs 466 per share.  

Disclaimer: The views/suggestions/advice expressed here in this article are solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.