Stocks of IT companies will remain under pressure, better return on long term investment possible
Highlights
- Five IT stocks of the 30-share Sensex fell up to 43 per cent this year
- Tech Mahindra slips 42.68%, Wipro 41.38% and HCL Technologies up 25.38%
- Double digit growth potential for IT sector in long term
IT The stocks of the companies are expected to remain under pressure for now. Analysts expressed the view that this is likely to happen due to deteriorating economic conditions in major global markets and volatility in financial markets. However, the outlook for the long term remains good. The work with the companies remains strong in the coming times. The country’s largest software exporter Tata Consultancy Services (TCS) reported a 5.2 per cent increase in net profit for the June quarter. The company’s quarterly results came after the close of business on Friday. Meanwhile, IT stocks are falling and the BSE IT index has fallen nearly 24 per cent so far this year.
Operating margin impacted
Analysts believe that the challenges of raising salaries due to exchange rate volatility and massive talent crunch are impacting operating margins. Although it is too early to draw any conclusions, but the developments going on in Britain are also closely watched by all. In the rapidly changing political developments there, Indian-origin Rishi Sunak is considered a strong contender to become the Prime Minister. Sunak is the son-in-law of Infosys co-founder NR Narayana Murthy. Aditi Patil, research associate at brokerage firm Prabhudas Lilladher, said the macroeconomic environment in the US and Europe is showing signs of worsening and will impact the IT sector.
IT stocks fell up to 43 per cent this year
IT stocks are expected to remain under pressure. This is the reason why five IT stocks of the 30-share Sensex have lost 43 per cent this year. Tech Mahindra has fallen by 42.68 percent, Wipro 41.38 percent and HCL Technologies by 25.38 percent so far in the year 2022. TCS and Infosys declined 12.63 per cent and 19.87 per cent, respectively. So far this year, the Sensex has lost 3,771.98 points or 6.47 per cent. Tanushree Banerjee, co-head of research at Equitymaster, said IT companies may face some degree of margin pressure due to exchange rate volatility in the near future. “The prospects remain good for the long term,” Banerjee said, adding that the jobs with the companies remain strong in the times to come.
Great potential for double digit growth
HDFC Securities Vice President (Institutional Research – IT) Apoorva Prasad said there is a lot of double digit growth potential for the IT sector in the medium term. VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services, said IT stocks are doing well after the recent sharp fall.
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