Investors should switch to Tata Consultancy Services Ltd (TCS) from Larsen & Toubro Ltd (L&T) as valuations and fundamentals now favour the software services exporter over the engineering firm, Credit Suisse says in a note on Friday.
TCS shares surged 73 percent last year, compared with a flat performance by L&T. But roles have reversed this year, with the construction firm up 21 percent and the IT firm down 3.1 percent.
Credit Suisse estimates L&T is now trading at a 14 percent price-to-earnings premium to TCS, the highest since October 2010, even as consensus earnings estimate changes have been "insignificant."
The investment bank adds that TCS also scores well on fundamentals such as leverage, earnings-per-share growth and cash generation.