Guest AuthorNifty 50 had made a 52 week high of 18,604.45 on 19th October 2021. IT companies have weightage of approximately 16% in Nifty, which is 2nd largest constituent weightage-wise. Nifty is now trading at 16,220.60, which is ~13% down from its 52 week high.
Nifty IT
Nifty IT made a 52-week high of 39,556.70, and a 52-week low of 26,399.75. Currently, Nifty IT is below all its important averages (50 DMA, 100 DMA, 200 DMA) which, still, is not a good sign. The chart below explains the Nifty IT index levels with all the important moving averages marked in it.
Nifty IT Constituents
Nifty IT index consists of 10 companies listed on National Stock Exchange (NSE).
Nifty IT Constituents
|
Sr No. |
Company |
Weightage in Nifty IT (%) |
CMP |
52-Week High |
Fall from 52-week high (%) |
|
1 |
Infosys Ltd. |
26.65% |
1,514.45 |
1,953.90 |
-22.49% |
|
2 |
TCS Ltd. |
26.50% |
3,265.45 |
4,043.00 |
-19.23% |
|
3 |
Tech Mahindra Ltd. |
9.27% |
1,026.50 |
1,838.00 |
-44.15% |
|
4 |
HCL Technologies Ltd. |
9.16% |
983.55 |
1,377.75 |
-28.61% |
|
5 |
Wipro Ltd. |
9.15% |
419.10 |
739.85 |
-43.35% |
|
6 |
Mphasis Ltd. |
4.75% |
2,232.80 |
3,659.75 |
-38.99% |
|
7 |
Mindtree Ltd. |
4.65% |
2,889.75 |
5,060.00 |
-42.89% |
|
8 |
Larsen & Toubro Infotech Ltd. (LTI) |
4.54% |
4,067.85 |
7,588.80 |
-46.40% |
|
9 |
Coforge Ltd. |
3.24% |
3,606.65 |
6,135.00 |
-41.21% |
|
10 |
L&T Technology Services Ltd. (LTTS) |
2.08% |
3,121.90 |
5,955.50 |
-47.58% |
Source: NSE India. CMP is the closing price as of 8th July,2022.
Nifty IT is currently trading at 28,250 (closing value as of 8th July), which is 28.38% down from its 52 week high. This clearly shows that Nifty IT has under-performed Nifty 50 in the last one year.
Reasons behind this downfall
- Global Market
With recent US FED policies announced to control the rising inflation, interest rates are increased. This has led to FII selling their investments from the Indian market and investing in the US market. Hence, once the interest rates are lowered, Indian markets would again become the best markets for FIIs to invest in. Also, Nifty IT majorly follows the trend of NASDAQ, and hence, we see a major downfall in Nifty IT compared to other sectoral indices.
- Attrition Rates
Post Covid, attrition rates is the major concern for IT companies, which is causing a dent in their balance sheet. Due to this, the attrition rate margins of the companies are impacted. Q4 FY22 saw the highest attritions in global IT companies. Below are the attrition rates for Indian IT companies:
|
Sr No. |
Company |
Attrition Rate (%) |
|
1 |
Infosys Ltd. |
28% |
|
2 |
TCS Ltd. |
17.4% |
|
3 |
Tech Mahindra Ltd. |
24.00% |
|
4 |
HCL Technologies Ltd. |
21.80% |
|
5 |
Wipro Ltd. |
23.8 |
Except TCS all companies saw an attrition rate above 20%.
- Valuations
Most of the IT companies are currently trading at P/E of 28 (Industry P/E), which is higher compared to the last 10 years. The industry P/E for the last 10 years was approximately 18. Below ist he P/E of various IT companies:
|
Sr No. |
Company |
P/E |
|
1 |
Infosys Ltd. |
28.99 |
|
2 |
TCS Ltd. |
30.8 |
|
3 |
Tech Mahindra Ltd. |
17.95 |
|
4 |
HCL Technologies Ltd. |
19.77 |
|
5 |
Wipro Ltd. |
18.79 |
Best IT Stocks to Buy
The stock has corrected 44% from its 52 week high. The company seems to be in the sweet spot because of its clientele exposure in the telecom sector, and 5G rolling out will be a positive for the company.
Wipro has made approximately 27+ acquisitions and 20 investments. The company has spent over $4.85B on acquisitions. Impact of these acquisitions would be seen soon in the balance sheet.
Disclaimer: The author is not SEBI registered and is sharing his personal opinion. Before investing in any of the stocks/ETF please consult your financial advisor.
Author Bio: Rishit Dedhia, a full time digital marketer who has keen interest in researching stocks in his free time.
Aravind Sundaram
Guest Author