Infosys, TCS, Wipro: These Nifty IT stocks destroyed wealth in last 2 years. Is it time for bottom fishing?

Amid the ongoing slowdown in the US and Europe, information technology (IT) majors in the country have underperformed the benchmark equity indices during the past two years. Data shows that as many as four companies in the Nifty IT have eroded investors’ wealth since June 2021.

With a fall of 30.11 per cent, Wipro was the top loser in the index. Shares of the company declined to Rs 382.60 on June 27, 2023, from Rs 547.40 on June 28, 2021. The NSE IT index inched 0.92 per cent lower during that period, while the NSE Nifty index surged 19 per cent in the last two years.

Infosys (down 18.62 per cent), Mphasis (down 10.25 per cent) and Tata Consultancy Services (down 4.18 per cent) were the other major losers in the index.

Talking about the IT stocks, Gaurav Dua, SVP, Head of Capital Market Strategy, Sharekhan by BNP Paribas, said, “With the slowdown in the US, Europe and key markets for Indian IT services companies along changing technology landscape, the companies are witnessing a slowdown in demand and there is a risk of further cuts in discretionary IT spending by large corporates in their target markets.”

“Indian IT companies have seen a downgrade in earnings estimates and the premium valuations have normalised to long-term average valuation multiples in the past 12-15 months. However, the underperformance could continue in the near term due to global uncertainties and continued downgrade in consensus earnings estimates,” Dua added.

At the other end, shares of Persistent Systems gained the most in the Nifty IT index. The scrip rallied 81 per cent to Rs 4,891.90 apiece on June 27, 2023, from Rs 2,702.25 on June 28, 2021. L&T Technology Services (up 33.40 per cent), LTI Mindtree (up 25.245 per cent), HCL Technologies (up 18.75 per cent), Coforge (up 13.90 per cent) and Tech Mahindra (up 1.32 per cent) were the other major gainers.

Sandeep Raina, Head of Research at Nuvama Professional Clients Group, said, “IT is looking reasonable; however, mid-cap IT is looking even better. But one has to understand that there are better options like manufacturing, capex-led companies and banking.”

Apurva Sheth, Head of Market Perspectives & Research at SAMCO Securities, added that the negative sentiment towards the IT sector is expected to persist because of delayed spending, global economic slowdown, fears of an impending recession in the US and Europe and EPAM’s guidance cut. Even though there is uncertainty, industry valuations have corrected significantly, and investors can consider adding firms like HCL Technologies and TCS during dips.

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