40% Fall In 1 Year, Is It Time to Build Position In IT and Tech Stocks?

A look at the IT and tech poor performance and view on the future

IT or tech sector funds decline

Shares of Tata Consultancy Services is 1.82% below its price from a year ago. Infosys is down by 3.64% while Wipro lost over 35% of its stock price. HCL is barely 1.71% over its price from a year ago, at the time of writing. Globally, IT giants like Meta and Twitter carried out mass layoffs while Indian IT companies felt pressures from issues like attrition. Funds investing in US as well as the Indian IT theme funds have performed poorly during the last year. Funds like Tata Digital India, ICICI Prudential Technology and Franklin India Technology have seen a negative growth in the one-year period. 

Also Read: Best Indian IT stocks for long term returns

Nervous Tech down 

For major US tech companies like Amazon and Meta ad revenue is an important income source. With inflation skyrocketing, businesses have cut down on advertising expenses. This became apparent in the poor quarterly performance by Meta, Amazon, Microsoft, Alphabet etc. No wonder, NASDAQ has lost over 27% during the last year.  

Indian markets have avoided the downward slide that has afflicted most overseas markets. However, IT has been slow in its recovery while many other domestic sectors performed well.

The falling rupee didn’t help IT stocks to rise, as fears of a global recession gathered pace. Indian IT has a dependency on the US and European market, and recession fears have been the strongest in these economies. Besides, inflation has been record high in many countries, with a 40-year high in the US. All of this has led to a prolonged bullish sentiment in the IT sector.

The geopolitical tension in Ukraine has also dampened the market enthusiasm earlier this year. The market in general, including IT stocks, plummeted as Russia invaded Ukraine. While the index recovered, Nifty IT has not touched the highs of early April yet.

Also Read: Infosys vs TCS vs Wipro. Which one should you buy? IT stocks hit new 52 week low

IT’s okay?

IT giants like Infosys and TCS has bagged strong deal wins. BNP Paribas has also noted that the two companies have recorded strong market share gains year-on-year and quarter-on-quarter. Nifty IT performance is closely reflected in NASDAQ movements. A 3% rally in the tech-heavy US index commensurate with a 4% rise in Nifty IT. While inflation has toned down in the US and the Fed driven interest hike expected to be less drastic, experts are hoping that IT stocks will recover.

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However, it will be wise for investors to wait till the recovery consolidates, in Indian IT as well as NASDAQ. Besides, the fears of a recession in the US are yet to subside. Because of this, most market watchers are not yet willing to concede that IT is bound for a sustained recovery. 

Therefore, careful picking with a long-time investment horizon is the recommended order of the day.

Disclaimer: This article is intended for general information purposes only and should not be construed as investment or legal advice. You should separately obtain independent advice when making decisions in these areas.




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