Growth uptick, multiple tailwinds to prop up information technology sector

Weak rupee, expectations of higher IT spending by US clients and undemanding valuations keep frontline stocks in demand

The information technology (IT) indices were the key gainers last week, outperforming the broader markets with a rise of about 4 per cent, led by both large- and mid-cap companies.

The broader markets might see intermediate rallies, such as the one on Monday. However, due to concerns over stiff broader market valuations of 18 times FY19 earnings estimates — mid- and small-caps are significantly expensive — and worsening macro indicators, such as inflation and rising bond yields, investors are looking at the IT sector as a defensive bet. The change in sentiment is also supported by the improving growth prospects