Neutral stance on IT despite lower valuations: Trideep Bhattacharya

Trideep Bhattacharya

The IT index has plunged over 4% after the guidance shocker from Infosys. The relief rally that the index had witnessed in the past week has completely fizzled out as shares of India's second largest IT services giant nosediving as much as 10% during intraday trade. However, Trideep Bhattacharya of Edelweiss AMC remains neutral on the industry despite low valuations, he told CNBC TV18 in an interview held on July 21. The market expert has upgraded to a neutral stance as against the underweight stance of last year but is not looking to modify his holdings in the sector as of present.

“In the context of our portfolio positioning then, we were massively underweight, about 300 basis points or so, about a year or so ago. We are now standing neutral. I think as we speak, that probably is in sync with, in tandem with where fundamentals are. So we have benefited from some of the relief rally that have come through” said Bhattacharya.

The Nifty IT Index has delivered a mere 1.77 percent return over the past 6 months as against the Nifty 50’s return of 9.14 percent over the same period. At 12pm on July 21, the Nifty IT Index is trading a percent lower at 19,773.45.

Although the sector has not performed worse than expected, Bhattacharya believes that the IT sector may not see a material recovery in the next two to three quarters.

This view is in line with TCS CEO Krithivasan’s recent comment stating “need a quarter or two before we can say difficult times are behind”. Market Expert Andrew Holland also suggests waiting for another quarter before investing in IT.

The overall sentiment of market experts suggesting refrain from investing in the IT sector for the next few quarters comes despite the 157 percent zoom in workforce demand from the IT sector in the first six months of 2023.