- Date : 20/04/2023
- Read: 3 mins
A look at the IT sector stock price decline and what should investors do.
Major IT stocks have seen a downhill ride in the last few days. The Nifty IT index plummeted to its 52-week low level of 26,185. It was circling at around 29,000 in early April this year. The pressure on the IT sector in the stock market is palpable. This has become a cause of concern for investors who have direct or mutual fund investments in the sector.
Also Read: Breaking down Infosys Q4 results: Key takeaways and insights investors must know
IT Sector Feels the Heat
The largest of the lot, TCS has seen a 3.7% slide in the last five days, while Infosys went down by 12.6% in the wake of its underwhelming Q4 results. Infosys saw its biggest single-day fall of 9.4% after its quarterly results were released. Tech Mahindra fell by 6.3% in the last five days, while HCL saw a fall of nearly 3.5%. HCL, Infosys and Wipro continue to be top losers as trade closed on 19th April 2023.
The earnings of the leading domestic IT players failed to meet street expectations. This has led to broad-based selling in the market. This was further aggravated by the improved performance shown by sectors like pharma, metal and real estate, thus attracting buyers.
Also Read: Want to invest in the best large and mid-cap funds? Here’s how pros do it.
Recovery Hopes
The IT industry in India is largely a service industry with a dependency on the IT budgets of companies in developed markets. The post-COVID slowdown and the impending recession have forced companies to pull the reins on their IT budget. Discretionary IT expenses are being put on hold by major US and European countries, which have reduced the order book and billing of Indian IT companies.
Experts believe that the IT sector will continue to experience these slow and volatile phases for some time. It must be noted that IT stocks hit a purple during the pandemic as the world went digital in a big way. Their order books swelled as clients increased their IT budgets substantially. Most IT stocks were sitting at dizzyingly high levels as a result. The recent lukewarm financial results made the stock prices slide, and the fall from such high levels was bound to be massive. When seen as a long-term curve, the current drop indicates that the graph is beginning to average out after a dream run.
Also Read: Wondering how mutual fund companies in India make their money? Here’s the story.
What Should Investors Do?
Right now, it is not the ideal sector for new and short or medium-term investors. Investors with long-term investment plans can choose to see through the risk and volatility, in the hope of long-term growth. Past trends have shown that the IT sector has delivered strong long-term returns. Its 10-year return stands at 18%. However, investors must note that the sector depleted by 17% so far in one year. Thematic mutual funds with a focus on technology stocks have mostly underperformed during the financial year 2022-23, falling by 11-18%.
It can be concluded that investments in IT funds are currently suited for investors with the composure to see off temporary volatility and the patience to hold on for long-term returns.
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.
Source:
https://economictimes.indiatimes.com
Major IT stocks have seen a downhill ride in the last few days. The Nifty IT index plummeted to its 52-week low level of 26,185. It was circling at around 29,000 in early April this year. The pressure on the IT sector in the stock market is palpable. This has become a cause of concern for investors who have direct or mutual fund investments in the sector.
Also Read: Breaking down Infosys Q4 results: Key takeaways and insights investors must know
IT Sector Feels the Heat
The largest of the lot, TCS has seen a 3.7% slide in the last five days, while Infosys went down by 12.6% in the wake of its underwhelming Q4 results. Infosys saw its biggest single-day fall of 9.4% after its quarterly results were released. Tech Mahindra fell by 6.3% in the last five days, while HCL saw a fall of nearly 3.5%. HCL, Infosys and Wipro continue to be top losers as trade closed on 19th April 2023.
The earnings of the leading domestic IT players failed to meet street expectations. This has led to broad-based selling in the market. This was further aggravated by the improved performance shown by sectors like pharma, metal and real estate, thus attracting buyers.
Also Read: Want to invest in the best large and mid-cap funds? Here’s how pros do it.
Recovery Hopes
The IT industry in India is largely a service industry with a dependency on the IT budgets of companies in developed markets. The post-COVID slowdown and the impending recession have forced companies to pull the reins on their IT budget. Discretionary IT expenses are being put on hold by major US and European countries, which have reduced the order book and billing of Indian IT companies.
Experts believe that the IT sector will continue to experience these slow and volatile phases for some time. It must be noted that IT stocks hit a purple during the pandemic as the world went digital in a big way. Their order books swelled as clients increased their IT budgets substantially. Most IT stocks were sitting at dizzyingly high levels as a result. The recent lukewarm financial results made the stock prices slide, and the fall from such high levels was bound to be massive. When seen as a long-term curve, the current drop indicates that the graph is beginning to average out after a dream run.
Also Read: Wondering how mutual fund companies in India make their money? Here’s the story.
What Should Investors Do?
Right now, it is not the ideal sector for new and short or medium-term investors. Investors with long-term investment plans can choose to see through the risk and volatility, in the hope of long-term growth. Past trends have shown that the IT sector has delivered strong long-term returns. Its 10-year return stands at 18%. However, investors must note that the sector depleted by 17% so far in one year. Thematic mutual funds with a focus on technology stocks have mostly underperformed during the financial year 2022-23, falling by 11-18%.
It can be concluded that investments in IT funds are currently suited for investors with the composure to see off temporary volatility and the patience to hold on for long-term returns.
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.
Source:
https://economictimes.indiatimes.com
