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Business News/ Markets / Stock Markets/  Why IT stocks are under pressure despite a weak rupee

Why IT stocks are under pressure despite a weak rupee

  • IT stocks are witnessing selling pressure as the margins have declined on account of supply side pressures and decline in implementation, believe stock market experts

Stock market today: TCS, Infosys, Mindtree and Wipro are at value buying levels so investors may take long position in these stocks for at least 8-12 months time horizon, say experts.

Stock market today: Last week was one of the most difficult week for traders as markets oscillated sharply on both the sides. However, it was surprising for the traders as IT stocks continues to remain under pressure despite Indian National Rupee (INR) hit its record low against the US Dollar (USD). In last one week, IT majors like TCS, Infosys, Wipro ended in red zone logging weekly loss of near 3 per cent. MindTree share price shed near 2 per cent last week. However, Birlasoft shares surged around 4.50 per cent in last 5 trade sessions.

Explaining why IT stocks are under pressure despite weak rupee, Ravi Singh, Vice President & Head of Research at Share India said, "IT stocks are witnessing selling pressure as the margins have declined on account of supply side pressures and decline in implementation. As the manpower expense increased, the margins reduced due to higher attrition rates, further resulted to slower growth in profits as compared to revenue growth. Another factor contributing to IT sector fall is the US Fed tightening its monetary policy to fight inflation, putting pressure on US indices and FIIs outflow from Indian markets."

Expecting further falling IT index, Manoj Dalmia, Founder & Director at Proficient Equities said, "Weakness in IT stocks can be attributed to three major reasons — weak margins and earnings report, higher expenses in terms of hiring and retaining employees due to demand and valuation of IT stocks is currently at about 28 times P/E compared to the past 10 year P/E of 18. We might expect the IT index to fall further till 27500 levels, investors can accumulate quality IT stocks during these falls with long term perspective."

Stocks to buy today

On IT stocks that one can think of adding in portfolio at current discounted levels, Ravi Singh of Share India said, "TCS, Infosys, Mindtree and Wipro are at value buying levels so investors may take long position in these stocks for at least 8-12 months time horizon."

However, Manoj Dalmia suggested positional investors to look at IT stocks like Tech Mahindra, Coforge and Birlasoft as well.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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Asit Manohar

Chief Content Producer at Live Mint Digital Team
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