IT stocks face heat on D-Street, emerge as worst BSE 100 performers

Technology stocks have remained under pressure in 2022 so far. The intensity of the selling pressure is so severe that the top five worst performers in the BSE100 index belong to the IT sector.

These five IT counters have plunged between 30-42 per cent during the current calendar year and wiped off close to Rs 3,27,900 crore from investors' pockets.

The list includes bluechips like Wipro and Tech Mahindra which are down 42 and 40 per cent, respectively on a year-to-date (YTD) basis. Another largecap HCL Technologies has plunged 28 per cent in 2022 so far.

Midcap IT players such as Larsen & Toubro Infotech (37 per cent down), Mphasis (35 per cent down) and Mindtree (31 per cent down) are also among the five worst performers.

Despite a steep depreciation in the Indian currency, software exporters have remained out of favour. Analysts also rule out expectations of a sharp recovery anytime soon.

Aman Chowhan, Fund Manager, Abakkus Asset Manager LLP said he is neutral on IT.

"We have not sold anything. Even if there is a global position, the best way global companies can cut costs is by moving to India but in the near term, momentum is not there because there is margin pressure," he said.

The majority of IT counters have missed Street estimates in June 2022 quarter and their margins have remained under the pressure, facing the biggest earnings challenge in more than a decade.

Global brokerage Morgan Stanley believes that risk-reward is less favourable. However, it is overweight on Infosys, Tech Mahindra and Mphasis, and underweight on Wipro, HCL Tech and Cyient.

In an interview with ET Now, Rahul Sharma, Director & Head - Research, JM Financial Services said IT is coming out of a seven-month underperformance.

"We believe that IT as of now remains neutral but there is a good possibility that in the next couple of quarters, IT should see a big reversal and should also start contributing to the Nifty’s bull run," he added.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)