IT stocks find no takers in rallying markets: TCS, HCL Tech down over 1%

The fall was led by selling in frontline IT stock such as Tech Mahindra, Wipro, Infosys, TCS and HCL Tech which were down over 1 per cent

Wipro Ltd.

BSE

466.30

15.35(3.40%)

Vol: 85973 shares traded

NSE

466.60

14.90(3.30%)

Vol: 969350 shares traded

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NEW DELHI: The BSE IT Index plunged over 1 per cent on Monday as investors preferred to book profits. The fall was led by selling in frontline IT stock such as Tech MahindraBSE 2.95 %, Wipro, Infosys, TCSBSE 1.34 % and HCL TechnologiesBSE 3.23 % which were down over 1 per cent.

At 11:00 a.m.; the BSE IT index was trading 1.3 per cent lower at 7701.83 as compared to over 200 points rally in the S&P BSE Sensex. The benchmark index was up 1.07 per cent to 19943.46.

Tata Consultancy ServicesBSE 1.34 % was trading 1.4 per cent lower at Rs 1923, while Infosys was down 1.2 per cent to Rs 2989.00.

WiproBSE 3.40 % recouped some of the losses and was trading 0.9 per cent lower at Rs 451.05, while HCL Technologies was trading 3.8 per cent lower at Rs 1005.

IT stocks have been in some sort of an uptrend so far in the year 2013 supported by sharp depreciation in the domestic currency and signs of revival in global economies such as US and Europe.

If we look at data since January, the BSE IT Index has rallied nearly 37 per cent as compared to 1.5 per cent rise in the S&P BSE Sensex, as of data collected on September 13.

The Indian IT sector earns over 80 per cent of its revenues from the overseas markets. Hence, the heightened prospects of a recovery in the US economy augur well for Indian IT exporters.

IT stocks have been on a winning streak for about a month, largely due to a lack of investment avenues as the sector provides natural hedge against the slowdown in the domestic economy. With global economy showing signs of picking up, investors have found safe-haven in IT stocks.

Most analysts are of the view that at a time when currency is weakening, technology and pharmaceuticals stocks become the obvious choice, one should look beyond these sectors as there are many mid-cap companies with higher share of export earnings, and where the stock valuations are available cheap.

"We are fairly bullish on the business prospects of IT and its long term prospects. We have seen with depreciation in rupee, there is a significant comparative advantage that has been built in," said Amit Rathi, MD, Anand Rathi Financial Services Ltd in an interview with ET Now.

"Over the last three or four years, there was a move back towards onshoring within the US as differential between the US rates and Indian rates had compressed significantly. We are back to 2000-2001 levels in from a comparative positioning perspective," he added.

Rathi is of the view that over the next two or three years, we would see significant volume growth for IT companies.

Ajeet Kumar
PGDM
1st year