Despite the recent downturn in the domestic bourses, the IT sector has emerged as an attractive segment for investors. While a stronger dollar has always rendered good valuation to stocks of IT companies, analysts suggest that the current trend of the tech-giants posting healthy quarterly earnings has added to the shine of this sector’s shares.
Shares of IT blue-chip companies such as Infosys, TCS (Tata Consultancy Services), HCL Technologies and Wipro were among the top gainers on the domestic bourses in Thursday’s trade. “In the recent sessions, while Nifty had dived almost 4 percent from its May 15 high, the IT index fell by only 1.1 percent,” V K Sharma, Head Private Client Group & Capital Market Strategy at HDFC Securities, pointed out.
What contributed to the IT sector’s strong foothold
“There seems to be a confidence among investors that IT is a sector where one can seek shelter during drops. This sector was under-owned before, in addition the quarterly earnings of most IT companies were good. So, in the current scenario of uncertainty in the markets, it is a safe sector to be in,” V K Sharma said to FE Online.
In the past seven sessions, the key equity indices — the Sensex and the Nifty 50 — plunged over 3 percent each as an uncertainty around the political scenario in Karnataka, along with various geopolitical factors, marred investor’s risk-taking appetite. However, with the political uncertainty abating, investors resumed buying.
What also added to the gains in the stocks of IT giants was a recent fall of the domestic currency against the US dollar to an 18-month low on Wednesday. “Most of these (IT) stocks had bottomed out in recent times, hence investors are seeing this as a good trading opportunity. Rupee weakness in the recent sessions also favoured top IT companies.” Rahul Sharma, Senior Research Analyst at Equity99, told FE online.
On Thursday, the S&P BSE IT index was trading up 2.04 percent at around 12.15 pm, with Infosys’ shares up 2.58 percent and TCS shares up 2.40 percent. On the NSE Nifty 50 index, Infosys was trading up 2.69 percent, TCS up 2.46 percent and HCL Technologies up 2.02 percent.
Index-wise, the Sensex was trading 167.48 points or 0.49 percent higher at 34,512.39 points, while the NSE Nifty 50 rose 41.45 points or 0.40 percent to trade at 10,471.80 points. In the early morning trade, the Indian rupee had pulled back from its recent plunge to open around 12 paise higher.