Ankur Rudra, VP-Institutional Equities of Ambit Capital told CNBC-TV18, "In the last 12 months, the IT sector has gained about 70 percent overall and of that 70 percent more than half is thanks to currency. So part of it is just pure currency led earnings expansion, part of it was margin expansion and only a small part of it was re-rating, thanks to improving business prospects. Our analysis suggests that about 30 percent was actual business performance improving, so 50 percent of this gain was thanks to currency.”
“We don't think the currency weakness which supported the sector last year will continue this year. The companies we like for buying on dips are HCL Technologies and Tata Consultancy Services (TCS). Both these companies are exploiting the recovery in the US phenomenally well particularly gaining from the opening of the European market. But on the broader IT space we actually turned bearish over the last few months thanks to the valuation expansion and thanks to the currency led earnings expansion which we don't see benefiting as much going forward,” he added.
“The Second part to the IT story has been the risk aversion that has helped defensives particularly part of IT, pharma and FMCG. If we see the portfolio churn, IT will be one of the parts of the portfolio which will suffer from this as people churn away from and take profits in some of the names they have gained from. If you look at stocks like Tech Mahindra, Infosys, Wipro which is still laggards but did very well.”
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
