CNX IT shelters investors from market crash: Analysis

Moneycontrol Bureau

The CNX IT index fell around 1 percent Tuesday, but is still up 29 percent since the begining of this calendar, compared with a 9 percent decline in the broader Nifty index.

The gains were led by HCL Technologies (up 48 percent year-to-date), TCS (up 40 percent, Infosys (up 30 percent) and Wipro (up 16 percent) after April-June quarter earnings announcement.

Most IT stocks hit their 52-week highs in August as the Indian rupee weakened rapidly and US growth improved.

IT stocks have not seen significant profit taking so far. They are just 3-7 percent off their 52-week highs as against the Nifty that is down 14 percent from its 52-week high of 6229.

Even the weightage of IT in the Nifty increased, which is at 15.3 percent now versus 13 percent at the start of April.

The domestic currency has fallen around 14 percent since May 22. It today touched a record low of 64.11 per dollar, but closed off day's low at 63.25, down 12 paise from previous close.

Analysts estimate that every one percent depreciation in rupee improves margins by around 20-40 bps of IT company.

More importantly dollar revenue growth for Indian IT companies is seen at 12-14 percent, according to NASSCOM forecast and in rupee terms, it will be a lot more given rupee depreciation.

All IT companies have said FY15 would be better than FY14 given the recovery in the US.

After the quarterly earnings, brokerage houses are bullish on IT companies and had raised earnings per share estimates.

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