IT stocks have given blockbuster returns over past year: Should you invest?

The information technology sector has had a tremendous run on the markets. The Nifty IT Index has given a return of 41.67 per cent over the past year. The category average return of IT sector funds over the same period has been 42.49 per cent, according to data from Value Research. Several factors are responsible for this. One is the rupee’s depreciation against the dollar, which is expected to boost the earnings of all export-oriented sectors, including IT. Strong economic growth in the US means that the discretionary spending of US corporates on information technology will be strong. However, after such a strong run-up, investors need to be extremely wary about valuations when picking individual stocks, especially with the markets turning turbulent.