Indian IT stocks are reeling under tremendous pressure for the last quarter. Most Indian IT companies’ share prices that cater to clients worldwide have fallen up to 45 per cent this year. Stocks of heavyweights like TCS, Infosys, Wipro have cracked 20 to 45 per cent so far.
The pressure in the stock price of these IT giants is mainly on account of the heightened recession fear in the major economies like the United States and Europe due to steep rate hikes, constraints in the supply chain and other issues. IT companies are basically major cash generating firms but the rising cost of capital has also shaved off their valuations by more than 30 per cent.
The Nifty IT index is currently at 27,067 – down by more than 30 per cent from 52-week high of 39,446.70.
TCS, the largest IT service provider in the country, is available at a discount of nearly 30 per cent from its 52-week high of Rs 4043 on January 17 this year. TCS share price on Wednesday, September 28, gained 0.36 per cent to settle at Rs 3,028.35 on the NSE. The stock made a fresh low of Rs 2926.10 on Monday, September 26.
Likewise, Bengaluru-headquartered Infosys, the second largest IT company, share price has tanked around 28 per cent from its 52-week high of Rs 1953.90 on January 17. It made a fresh 52-week low of Rs 1,355 on Monday, September 26.
Wipro too is facing the heat as it is trading near its 52-week low of Rs 384.60. The counter had made 52-week high of Rs 739.85 on October 14.
Even as the stocks of these companies are under pressure, experts are bullish on the sector’s growth. Market expert and IIFL Securities Director Sanjiv Bhasin had last week in a special segment ‘Bhasin Ke Hasin Share’ aired on Zee Business said that he is extremely positive about the outlook for the IT sector.
According to HDFC Securities, the price targets for the top 3 Indian IT stocks — TCS, Infosys and Wipro would be:
TCS Share Price Target – Rs 3620
Infosys Share Price Target – Rs 1800
Wipro Share Price Target – Rs 475
IT companies derive a thick portion of their revenues from foreign markets. In the given world scenario when the American dollar is gaining strength, it is natural for companies to report healthy numbers as they deal in dollars. However, the rising uncertainty in the global markets due to geo-political disruptions like Russia-Ukraine war, skyrocketing inflation, high energy prices, unpredictable volatility and other factors are adversely impacting their operations.
The rupee depreciation can surely provide a tailwind but cross currency losses are eroding the benefits. Also, the rising attrition rate is affecting the businesses of IT companies. Even as the hiring spree has cheered tech professionals, the companies are worried because of the unprecedented levels of attrition, rising manpower costs and issues such as moonlighting.
(Disclaimer: Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)
