IT shares under pressure as rupee hits 2-month high; Nifty IT index dips 3%
TCS, Infosys, HCL Technologies, NIIT Technologies, Wipro, Tata Elxsi, Tech Mahindra and Mindtree from Nifty IT index were down in the range of 2% to 3% on the NSE.
 "IT shares under pressure as rupee hits 2-month high; Nifty IT index dips 3%")
premium
Shares of information technology (IT) companies were under pressure on Wednesday, with Nifty IT index falling 3%, as the rupee hit a two-month high against US dollar a day earlier. Tata Consultancy Services (TCS), Infosys, HCL Technologies, NIIT Technologies, Wipro, Tata Elxsi, Tech Mahindra and Mindtree from Nifty IT index were down in the range of 2% to 3% on the NSE.
Among the non-index stocks, Larsen & Toubro Infotech, Sonata Software, KPIT Technologies, Zensar Technologies, Hexaware Technologies, L&T Technology Services, Persistent Systems and Mphasis slipped between 2% to 5%.
At 09:56 am; Nifty IT index, the largest loser among sectoral indices, was down 3% at 13,850, as compared to 0.42% decline in the Nifty 50 index. Thus far in November, the IT index has underperformed the market by falling 7%, as against 2.2% rise in the benchmark index.
The rupee rose by 21 paise to end at 71.46 against the US dollar Tuesday, its highest level since September 3, 2018, on increased selling of the greenback by exporters amid softening crude oil prices, and persistent foreign fund inflows. In the last six trading sessions, the rupee has gained 143 paise, while thus far in November, the currency gained 3.3% or 250 paise. Money and forex markets are closed today for 'Eid-e-Milad'.
Meanwhile, analysts at Nirmal Bang believe growth for IT sector will be dispersed in FY19 with TCS leading the pack. At the current levels, they prefer large-cap IT stocks over their mid-cap peers.
“In our coverage universe, we believe only TCS will witness any material pick-up in organic revenue growth in the Tier-1 space. We prefer large-caps over mid-caps at current valuations. Mid-caps may witness faster growth pick-up on a low base in FY19 (and from bombed-out margins in some cases), but would advise investors to focus on sustainability and not overpay for a riskier business model. Current valuations of mid-cap stocks factor in strong growth over a two to three-year time frame - which we believe is unlikely,” the brokerage firm said in sector report dated November 12, 2018.
“While we expect mid-cap IT companies to outpace larger IT companies in the short run, we expect higher growth rates for large-cap IT companies in the medium-to-long run. As digital deal sizes rise, we expect enterprises to shift from mid-cap to large-cap IT companies on scale benefits and better execution. Also, with sustained rise in demand for IT services and higher protectionist rhetoric, mid-cap companies may find it difficult to retain talent. Accordingly, we prefer large-cap IT names along with ER&D players,” analysts at Edelweiss Securities in report called ‘India Strategy 2019’.
Among the non-index stocks, Larsen & Toubro Infotech, Sonata Software, KPIT Technologies, Zensar Technologies, Hexaware Technologies, L&T Technology Services, Persistent Systems and Mphasis slipped between 2% to 5%.
At 09:56 am; Nifty IT index, the largest loser among sectoral indices, was down 3% at 13,850, as compared to 0.42% decline in the Nifty 50 index. Thus far in November, the IT index has underperformed the market by falling 7%, as against 2.2% rise in the benchmark index.
The rupee rose by 21 paise to end at 71.46 against the US dollar Tuesday, its highest level since September 3, 2018, on increased selling of the greenback by exporters amid softening crude oil prices, and persistent foreign fund inflows. In the last six trading sessions, the rupee has gained 143 paise, while thus far in November, the currency gained 3.3% or 250 paise. Money and forex markets are closed today for 'Eid-e-Milad'.
Meanwhile, analysts at Nirmal Bang believe growth for IT sector will be dispersed in FY19 with TCS leading the pack. At the current levels, they prefer large-cap IT stocks over their mid-cap peers.
“In our coverage universe, we believe only TCS will witness any material pick-up in organic revenue growth in the Tier-1 space. We prefer large-caps over mid-caps at current valuations. Mid-caps may witness faster growth pick-up on a low base in FY19 (and from bombed-out margins in some cases), but would advise investors to focus on sustainability and not overpay for a riskier business model. Current valuations of mid-cap stocks factor in strong growth over a two to three-year time frame - which we believe is unlikely,” the brokerage firm said in sector report dated November 12, 2018.
“While we expect mid-cap IT companies to outpace larger IT companies in the short run, we expect higher growth rates for large-cap IT companies in the medium-to-long run. As digital deal sizes rise, we expect enterprises to shift from mid-cap to large-cap IT companies on scale benefits and better execution. Also, with sustained rise in demand for IT services and higher protectionist rhetoric, mid-cap companies may find it difficult to retain talent. Accordingly, we prefer large-cap IT names along with ER&D players,” analysts at Edelweiss Securities in report called ‘India Strategy 2019’.
| COMPANY | LATEST | PREV CLOSE | LOSS(%) |
| L & T INFOTECH | 1495.50 | 1584.50 | -5.62 |
| SONATA SOFTWARE | 307.25 | 319.40 | -3.80 |
| KPIT TECH. | 198.15 | 205.75 | -3.69 |
| INFOSYS | 617.50 | 641.10 | -3.68 |
| TAKE SOLUTIONS | 134.10 | 138.90 | -3.46 |
| TCS | 1815.30 | 1877.75 | -3.33 |
| TECH MAHINDRA | 687.30 | 709.35 | -3.11 |
| MINDTREE | 809.45 | 833.95 | -2.94 |
| TATA ELXSI | 961.70 | 988.95 | -2.76 |
| FIRSTSOUR.SOLU. | 51.50 | 52.95 | -2.74 |
| HCL TECHNOLOGIES | 983.85 | 1011.50 | -2.73 |
| ZENSAR TECH. | 230.90 | 237.35 | -2.72 |
| PERSISTENT SYS | 538.00 | 551.05 | -2.37 |
| NIIT TECH. | 1083.35 | 1109.05 | -2.32 |
| HEXAWARE TECH. | 302.50 | 308.60 | -1.98 |
| L&T TECHNOLOGY | 1481.10 | 1511.05 | -1.98 |
| MPHASIS | 907.05 | 925.20 | -1.96 |
| CYIENT | 627.30 | 637.95 | -1.67 |
| WIPRO | 316.65 | 321.70 | -1.57 |
One subscription. Two world-class reads.
Already subscribed? Log in
Subscribe to read the full story →*Subscribe to Business Standard digital and get complimentary access to The New York Times
Smart Quarterly
₹900
3 Months
₹300/Month
SAVE 25%
Smart Essential
₹2,700
1 Year
₹225/Month
SAVE 46%
*Complimentary New York Times access for the 2nd year will be given after 12 months
Super Saver
₹3,900
2 Years
₹162/Month
Subscribe
Renews automatically, cancel anytime
Here’s what’s included in our digital subscription plans
Exclusive premium stories online
Over 30 premium stories daily, handpicked by our editors
Complimentary Access to The New York Times
News, Games, Cooking, Audio, Wirecutter & The Athletic
Business Standard Epaper
Digital replica of our daily newspaper — with options to read, save, and share
Curated Newsletters
Insights on markets, finance, politics, tech, and more delivered to your inbox
Market Analysis & Investment Insights
In-depth market analysis & insights with access to The Smart Investor
Archives
Repository of articles and publications dating back to 1997
Ad-free Reading
Uninterrupted reading experience with no advertisements
Seamless Access Across All Devices
Access Business Standard across devices — mobile, tablet, or PC, via web or app
SAVE 25%