Analysts believe the margin differential between the two at about 90 bps is expected to remain in the near term, given the multiple margin headwinds, including salary hikes and travel costs.
While margin gains are a key rerating trigger, Suyog Kulkarni of Reliance Securities believes Infosys will focus on achieving strong revenue growth, given the opportunities in digital services. He says that in case the company manages to sustain its growth outperformance over the next few quarters, the valuation discount to TCS could be bridged.
Recent growth triggers for Infosys have been investments to boost its capabilities over the past two years, which, coupled with acquisitions, especially in the digital segment, have helped it get a good share of digital deals.
In addition to its inorganic approach, execution, too, has been better than TCS. Moreover, the biggest overhang for the company was the frequent leadership changes which were addressed when Salil Parekh was appointed in December 2017.
While there may not be outsized returns from the Infosys stock
which has gained 33 per cent over the past three months, analysts expect investors to make money over the long term, given the resilience in technology spends and digital growth opportunity.