IT Stocks

Why you should sell your IT stocks today?

Following the abrupt withdrawals of foreign investors, who have taken almost Rs1.65 lakh crore out of the Indian equities markets this year, IT companies have been groaning under pressure. The majority of IT businesses have underperformed compared to consensus growth forecasts, and the outlook for margins is moderate. In the current year so far, the BSE IT index has decreased by 8%. As markets fluctuated significantly on both sides last week, it was one of the hardest weeks for traders. The Indian National Rupee (INR), which recently touched a record low versus the US Dollar, surprised traders by continuing to face pressure on IT equities (USD).

Major IT companies like TCS, Infosys, and Wipro closed the week in the red, posting weekly losses of close to 3%. The share price of MindTree decreased by over 2% last week. The last five trading sessions saw a 4.50 percent increase in Birlasoft share price.

What are the opinions of experts?

Market analysts claim that the IT industry is dealing with a number of challenges both at the macro and micro levels, including a slowdown in economic growth as well as pressure on companies’ revenue and margins.

In an interview, Ravi Singh, who serves as Share India’s vice president and head of research, stated, “As a result of supply-side constraints and a fall in implementation, IT companies are under selling pressure since their margins have shrunk. As the cost of hiring more people rose, the margins shrank as a result of increasing attrition rates, which further led to a slower increase in profits than in revenue growth. 


According to a recent interview with Vaibhav Agrawal, the company’s founder said, “The sell-off we saw in Nasdaq this week was mirrored by the decline in IT stocks, which saw their year-to-date losses increase to more than 25%. A slowdown in the growth of IT Services is being caused by the growing concern about the impending US recession, which is affecting technology spending. As a result, the sector is experiencing a macro pressure point “.

The founder and director of Proficient Equities, Manoj Dalmia, predicted that the IT index would continue to decline. He stated “Weak margins and earnings reports, higher hiring and retaining costs due to demand, and overvaluation of IT stocks at 28 times P/E compared to the past ten years’ P/E of 18 are the three main causes of the decline in the value of IT stocks. If the IT index continues to decline, we may expect it to reach levels as low as 27500. Investors can stockpile high-quality IT equities during these declines if they have a long-term outlook.”

Is there cause for concern for investors?

Since this type of attrition cannot persist for an extended period of time, as these organizations scale up new hiring and business expansion, as well as when attrition levels off, I do believe that the market hypothesis about the sustainability of the cost pressures and recession will come down in the next couple of quarters. According to experts, there is no reason to be concerned as long as the structural demand environment is stable. The IT pack is still lagging behind or in a neutral zone. 

Experts agree that customers will return as long as the demand climate is favorable and there is high customer demand. These businesses have dealt with a variety of uncertain conditions in the past, so it is nothing new for them.


The Nifty IT index resumed its losing run for the eighth week in a row, according to Technical and Derivatives Research, Centrum Broking, which also provided a structural breakdown. The oscillators and momentum indicators have entered a severely oversold area, which suggests that there may be a retreat that should be taken as an opportunity to sell.

Stocks to purchase right now

TCS, Infosys, Mindtree, and Wipro are among the IT firms that one can consider adding to a portfolio at the current discounted levels because they are at value purchasing levels, allowing investors to take long positions in these stocks for at least an 8–12 month time horizon. Positional investors should, however, also consider IT equities like Tech Mahindra and Birlasoft, according to analysts.

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