Global recession fears spook IT stocks

Global recession fears spook IT stocks

By Siddhant Mishra

Stocks of IT companies have been reeling under continuous pressure, with the BSE IT index having slumped almost 23% since the beginning of the year. The index, down 22.89% on a year-to-date (YTD) basis, has shown negative returns for the first time in five years. This has been the index’s biggest fall since 2008, when it tanked close to 53%. The index witnessed a 134% jump in 2009.

Also read: Relief to UPI market leaders: PhonePe, GPay get 2 more years for 30% share cap rule

The worst-performing stocks in the group have been Brightcom Group and Cerebra Integrated Technologies, which have lost more than 67% each since the turn of the year. Brightcom shares, however, jumped 6% on Monday after the company clarified to the stock exchanges on Saturday that the NSDL accounts of the promoter were not frozen, contrary to what was being reported.

Even the six top-valued stocks have lost heavily, with Wipro having shed the most at 44% while Tech Mahindra has slid 40% and TCS 11%.

“We believe investors need to be selective in stock picking and grab the opportunity to create long-term portfolio of quality companies available at reasonable valuations,” said Pokharna.

HCL Tech has lost 18% YTD. Last week, the stock tanked 7% after the company said clients in the key US and European markets were cutting down on IT spend, which would affect the firm’s top line.

On the other hand, the fall in prices offers a good buy opportunity, according to Deven Choksey, promoter of KRChoksey Group. According to him, global funds have been reducing exposure to the tech sector following huge losses from FAANG (Facebook, Amazon, Apple, Netflix, Google) stocks. He added that India cannot be excluded from what’s happening on a global level, and hence international funds — which had high exposure to IT thanks to promising returns — are exiting the sector.

Also read: Sensex regains 500 pts after falling intraday, Nifty ends flat amid volatility; traders await CPI, IPP data

“Fundamentals of IT companies are not weak, plus revenues and order book are also not falling. They will do well because companies are spending money on IT infra, contrary to what’s being said, given that it is crucial to survival,” said Choksey.

IT stocks came under pressure last week after Credit Suisse in a note warned of further correction in valuations in case the US macroeconomic scenario weakens.