IT Stocks Outlook for the week – 11 to 15.05.2015
Stocks
of information technology companies are likely to outperform the overall market
if
overall sentiment remains bearish, even as the sector is expected to benefit
from any
weakening
of the rupee against the dollar. We expected, this week saw a slightly better
performance
from IT counters compared to the broader market. HCL Technologies led
the
pack with a 5.1% jump, while Infosys edged up only 0.8%.
The
markets saw a large amount of mayhem this week with foreign investors
continuing
to
offload their Indian shares in the market. Friday saw a slight bounce-back with
many
local
players buying up shares that had tumbled sharply over the previous days. After
three consecutive weeks of weakness and a loss of over 800-points on the Nifty,
the market managed to put a brake on the relentless slide last week, courtesy
the 134-points rally on Friday. We believe that IT and Pharma sectors could be
good medium-to-longterm bets as we believe that a major part of the cross-currency
headwinds have already
played
out.
Next
week will also see volatility due to the release of Industrial Production (IIP)
and
Inflation
data. However, the biggest factor - FII sentiments - is still unpredictable. Government's
move to set up a high level committee to decide MAT issue has helped
market
on Friday. This could reduce FII's concerns over the medium term. But the risks
prevailing
with Q4 and outcome of key bills still remains, which will decide the market
momentum
going forward.
IT
stocks could gain from a weakening rupee and if the FIIs continue to sell they
would
outperform
broader markets. On Friday, IT stocks were largely flat, as rupee strengthened
nearly
0.5% from the 64.50 levels against the dollar seen on Thursday.
