Infosys CEO Vishal Sikka
Infosys CEO Vishal Sikka [File Photo]Reuters

Infosys has now become the preferred IT stock for investors, replacing India's largest software firm Tata Consultancy Services (TCS).

Fund managers, both overseas and domestic, have increased their exposure to Infosys in the past three months, leading the stock price of the country's second largest IT firm to outperform TCS.

Analysts have been increasingly buying Infosys stock for the past few months, on the expectations that the company's newly-appointed CEO, Vishal Sikka, would revive its growth.

During the June quarter, Foreign institutional investors (FIIs) stake in Infosys went up by 300 bps to 40.99 percent while domestic institutional investors (DIIs) increased their exposure by 100 bps to 16.11 percent.

On the contrary, buying of TCS shares by the fund managers was "muted" in the April-June period. While Infosys stocks rose 36 percent in the past one year, TCS remained flat.

"Technology companies may witness earnings volatility but overall they have good fundamentals for long-term investments," Ajeeth Narayan, country head of India at Investec Bank, told The Economic Times.

Infosys share prices rose over 10 percent this week alone, as investors increased their bets after the company announced a strong revenue growth for the first quarter this fiscal year.

"Infosys is going through a second round of stock rerating after the new management led by Vishal Sikka has delivered an encouraging set of quarterly results," said Kunj Bansal, chief investment officer at Centrum Wealth Management.

"TCS earnings performance was not encouraging this quarter," he said.

In the June quarter, revenue and volume growth of Infosys surpassed that of TCS for the first time in two years.

Infosys' sequential revenue growth of 4.5 percent during the June quarter in dollar terms was the highest in the past 15 quarters. On a quarterly basis, the volume growth of 5.4 percent during the quarter was also at its highest level not seen in the previous 19 quarters.

It also maintained its revenue growth forecast of 10 percent to 12 percent in constant currency terms for the fiscal year ending March 2016.

"We have revised our price target upwards to Rs 1,245 from Rs 1,145, while maintaining overweight rating on the stock," said Bhuvnesh Singh, managing director and head of research at Barclays.

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