TCS, Wipro to Infosys: Is it wise to accumulate IT stocks in FY25?
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Stocks to buy now: After witnessing an impressive trend reversal in the last session of the financial year 2023-24, stock market investors are busy finding out the value picks for their portfolio in the new fiscal. As most of the Indian indices are at record high levels, investors are looking at the IT segment as the segment has remained under the sell-off heat for a long time. So, it would be prudent to know whether one should accumulate IT stocks in the new financial year 2024-25.
According to stock market experts, after the Accenture share price crash on weak quarterly numbers, the Nifty IT index witnessed a sharp downside move as most of the frontline Indian IT stocks came under the sell-off heat. They said that after the weak guidance by Accenture, ADR prices of Infosys and Wipro have come under pressure. As Indian IT stocks follow ADR prices, Indian IT stocks are expected to remain in the base-building mode. However, they advised long-term investors to take advantage of this scenario as the Nifty IT index is still nearly 10 percent away from its record high made in January 2022.
Buy or sell: Is it wise to buy IT stocks?
On why IT stocks look attractive in the stock market today, VLA Ambala, Founder of Stock Market Today said, “Investors’ high expectations from Accenture met disappointment after its net revenue projections were lowered from 2-5% to 1-3%. This downgrade weakened its share trading in the US markets, raising concerns about the actual valuation of IT stocks. Accenture’s cautionary forecast has further affected the ADR shares of Wipro and Infosys, as IT giants tend to track and mimic ADR trends closely. Since it’s currently trading on a bearish note in the US stock markets, it could raise concerns. IT stocks also depend on the US market for business, so the US’ high inflation and slower economic growth could prompt underperformance and reduced revenue.”
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The SEBI registered equity research analyst went on to add that the Nifty IT is trading nearly 11 percent lower than its January 2022 all-time high, while the benchmark index is 1 percent away from the all-time high. Amid this, only the media and IT sectors, which belong to the service industry, are trading at a discounted rate compared to the mainstream index. These and the technical chart at the monthly time frame suggest that Nity IT still has room to reach the support range of 32,400 to 33,000. So, investors should consider investing in this sector in quality stocks in parts for better gains.”
In the last fortnight of the current financial year, TCS share price crashed from around ₹4220 to ₹3882, logging a nearly 8 percent crash in this time. Infosys shares nosedived in this time horizon from ₹1,653 to ₹1,495 apiece levels, clocking to the tune of a 10 percent dip in the last fortnight of FY24. Likewise, Wipro share price crashed from ₹517 to ₹480 per share level, registering more than 7 percent correction in this time.
Investment strategy in IT segment
Unveiling investment strategy while investing in IT stocks, Sandeep Pandey, Founder of Basav Capital said, “IT stocks have limited downside potential as most of the Indian IT stocks witnessed sharp drop after the weak Accenture guidance. As the US economy is improving with time, the order book of the frontline Indian IT companies is expected to scale northward. In that case, buying Indian IT stocks for the long term can be a good idea. However, one should not do this through an upfront investment. In my opinion, one should follow the SIP strategy and continue investing in every dip for the next two to three quarters of the next financial year. This will help them reap the compounding benefit through averaging of shares.”
IT stocks to buy now
Asked about the IT stocks to buy now, Sandeep Pandey of Basav Capital said, “One should look at large-cap stocks only as they are expected to outperform mid-cap and small-cap IT stocks. So, I would advise long-term investors to look at buying TCS, Wipro, and Infosys shares. Coforge and HDFC Tech would also be a good IT stock to accumulate in FY25.”
Disclaimer: The views and recommendations above are those of individual analysts, experts, and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decisions.
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Published: 30 Mar 2024, 10:44 AM IST
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