After a brief rally, Indian IT stocks declined on Tuesday. Shares fell up to 5 percent, with Persistent Systems (-5.13 percent), Mphasis (-3.94 percent), and Koforge (-3.60 percent) among the losers. Index heavyweights Tata Consultancy Services (TCS), Infosys, Wipro and HCL Technologies fell more than 1 per cent each.
The Nifty IT index declined by two per cent. The index opened at 29,003.50 against the previous close of 29,238.75 but soon fell as low as 28,662.65.
The index, after a nice gain of nearly six percent last month, is seeing profit-booking in June as investors fear that even if the Fed takes a pause at the June policy meeting, rates could rise later as US jobs plummet. Is. The market remains tight and inflation remains high. This will impact the growth prospects of the US which is an important market for Indian IT companies.
Furthermore, a fresh wave of selling can be attributed to an update by major US IT company EPAM Systems, which announced a reduction in its second quarter and full year 2023 financial outlook. According to a report by Yahoo Finance, EPAM Systems, Inc., a leading digital transformation services and product engineering company. announced today that it is lowering its second quarter and full year 2023 financial outlook due to further deterioration in the near-term demand environment.
IT stocks have underperformed the Nifty 50 by a margin over a 12-month period. The Nifty IT index has declined 4.6 per cent during this period, as against the 12 per cent (+1,974 points) return delivered by the 50-stock index, according to Trendline data.
What should investors do now?
Stock market experts are of the opinion that keeping interest rate unchanged by RBI will attract foreign investors as the global market has already expected US Fed rate hike of 25 bps in the upcoming GOMC meeting. He advised long term positional investors to start accumulating IT stocks for long term as quality IT stocks are available at highly discounted prices. However, he predicted that the fresh rally in Indian IT stocks would start from the large-cap segment, followed by mid-cap and small-cap IT stocks.
Expecting status quo from the RBI policy meeting, Vaibhav Kaushik, Research Analyst, GCL Broking said, “As the Indian economy is in good shape and most of the indicators are indicating strong numbers, I firmly believe that the RBI will decide on rate cut in its RBI MPC.” -may announce pause. meeting. If this happens, in that case we can expect a new rally in the Indian stock market. To maximize one’s returns, it is advised to look for stocks available at discounted prices IT segment can be looked at as potential multibaggers can emerge from this segment.”
Vaibhav Kaushik of GCL Broking said, “Birla Soft should be watched in the small-cap segment, while TCS and LTIMindtree can be a good long-term pick in the large-cap IT segment.” However, he added that HCL Tech and Infosys shares could be up. They also give better returns in the long term as these stocks announce buybacks and bonus shares at regular intervals.
Delays in customer decision making and reduction in discretionary spending have an impact on the growth of Indian IT. Kotak expects revenue in Q1FY24E to be weaker than Q4FY23 of the companies in its coverage universe.
The demand environment is particularly weak in the financial services and technology sectors.
Kotak expressed his shock over the rally in share prices of IT companies, despite a weak demand scenario with a prolonged recovery in consumers’ willingness to spend.
We believe advantages exist in Infosys and HCL Technologies but are wary of other names.
Disclaimer:Disclaimer: The views and investment tips given by the experts in this News18.com report are their own and not those of the website or its management. Users are advised to check with certified experts before taking any investment decision.
