Indian IT stocks have outperformed the Nifty 50 by 10% over the last month, says JP Morgan.
JPM notes IT stocks are trading at upper end of valuation bands, building hopes for better prints, bottoming earnings.
The recent rally means (Q1) misses/meets could be faded significantly and there is a higher bar on beats.
Still JPM expects "minor improvement" in Q1 due to large deals, seasonal strength; does not expect forecast upgrades.
Expect growth improvement in large-caps, led by 2% growth in Infosys and LTI Mindtree.
Expects TCS margins to contract due to wage hikes and INFY's to sharply expand on client provision reversal.
Says mid-caps to show greater growth disparity, margin decline.
JPM's top picks: Infosys, TCS, LTI Mindtree, Persistent Systems and KPIT Technologies.
Top avoids: Wipro, Tech Mahindra, Cyient, Mphasis and Coforge.
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