Betting on IT? Look at these 3 midcaps Dipan Mehta is sweet on

Some of the interesting midcap IT companies which we are focussing on are product and platform companies. These are companies like Intellect Design, Ramco Systems and also Nucleus Software, says Dipan Mehta, Founder & Director, Elixir Equities.

What is your view on IT and what are your top three holdings?
We remain very positive on software companies and the kind of deal flow, momentum, the confidence in the management and some of the underlying mega and minor trends underway in IT. Many times in the past, we have seen these trends and how they have actually played out and from experience I can say that although the size is much bigger for the IT companies and this time around base effect will come in but still I am pretty confident that the entire group could easily deliver a mid-teen type of earnings growth over the next three to five years.

What has changed in IT over the last year or so is the visibility of earnings and that has led to higher price to earnings multiples which are completely justified. IT companies still have enough to offer in terms of investment returns over the next three to five years. These companies could easily deliver 15-20% type of returns on a compounded basis over the next three to four years or so and depending upon the risk appetite, look for choices within the IT pack.

If you have less risk appetite, then go for the likes of Infosys and HCL Tech and even Wipro could be a dark horse. If you have a high risk appetite, then some of the interesting midcap IT companies which we are focussing on are product and platform companies. These are companies like Intellect Design, Ramco Systems and also Nucleus Software which has a slightly different business model that is non-linear in nature. These could do pretty well.

Even a company like TCS could do exceedingly well and we are looking forward to March quarter numbers because IT typically is first off the block and that does set the trend for the earning season.