Wednesday, April 8 was no less than a bumper lottery for the investors of the Indian stock market. Sensex and Nifty took a historic leap and filled investors’ pockets with profits. But amidst all this celebration, there was a section of the market which felt only disappointed. This section was of investors in the IT sector. While the entire market was moving up at the speed of a rocket, shares of leading IT companies like Infosys, Wipro and Tech Mahindra were diving into the red. In such a situation, it is natural to raise the question that when there is greenery all around in the market, what happened to IT stocks that they lagged behind in the race for profits?
Why is the IT sector ignored amid the bumper boom?
In Wednesday afternoon trading, BSE Sensex took a huge jump of 2,700 points (about 3.6%) and crossed the historical level of 77,300. At the same time, Nifty also jumped by more than 800 points and reached the level of 23,900. The main reason for this tremendous rise was the decreasing tension in the Middle East and the huge fall in the prices of crude oil. As soon as these positive signals were received at the global level, investors started buying heavily in domestic sectors like banking, auto and real estate. In this investment cycle, the IT sector remained slightly out of the radar of investors. In the morning, Nifty IT index was trading in loss, which later closed almost flat with a slight gain of just 0.12%.
Bad condition of veterans, some shares saved their shame
In this slowdown of the IT sector, the situation of all the companies was not the same. A very mixed trend was seen in the market. On one hand, Tech Mahindra shares fell by more than 1 percent, while Wipro shares also fell by about 0.6 percent. Shares of the giant Infosys also struggled throughout the day and remained in the red. However, meanwhile, Tata Consultancy Services (TCS) gave some relief to the investors and its shares rose by about 0.8%. Apart from this, strong growth of 1% to 1.3% was also seen in LTI Mindtree and Coforge. HCL Technologies also maintained itself in the green with a slight gain.
Why did the momentum of IT shares stop?
To understand the reasons behind this decline, we have to look back a little. Actually, there was a very good recovery in IT stocks for the last few days. In just four trading sessions till Tuesday, the Nifty IT index had risen by more than 7%. Due to cheapness of shares (fall in valuation), short covering and weakness of rupee, investors had invested a lot of money in IT stocks. Apart from this, expectations of better quarterly results were also supporting this rise. But on Wednesday, when investors started seeing more and quick profits in other cyclical sectors, they thought it better to invest their money there, which led to this stagnation in IT stocks.
Investors’ eyes are fixed on April 9
The real picture is now going to become clear for those investing in IT companies. Now the entire focus of the market is on the upcoming quarterly results. TCS is going to declare its fourth quarter results on April 9 and this is where the start of this earning season will begin. These results will decide the future direction not only for TCS but for the entire IT sector. Market analysts believe that along with these results, the management statements of IT companies and their pipeline of new deals will have to be closely monitored.