Nifty IT up 5% in November; why are IT stocks rising? Should you bet on the sector?
Tech Mahindra trading lower. The Nifty IT index has outperformed the benchmark Nifty 50 this year. The IT index has gained about 13 per cent this year so far while the benchmark index Nifty 50 is up over 9 per cent.
In November so far, the Nifty IT index is up over 5 per cent while Nifty 50 is up about 4 per cent. IT stocks have gained in the recent past on expectations that the US Fed is done with rate hikes amid easing inflation and a cooling labour market. The US is a key market for major Indian IT services companies and they earn a significant part of their revenue from the US.
(Exciting news! Mint is now on WhatsApp Channels. Subscribe today and stay updated with the latest financial insights! Click here!) Manoj Dalmia of Proficient Group of Companies observed that the Nifty IT index is up over 5 per cent this week after the recent softening of inflation in the United States has raised hopes that the Federal Reserve will soon end its cycle of interest rate hikes, which has been a drag on IT stocks. In addition, Dalmia pointed out that IT companies reported decent earnings in recent quarters, and there is optimism that the sector will continue to grow in the coming years.
Arvinder Singh Nanda, Senior Vice President at Master Capital Services observed the Nifty IT index price has executed a decisive reversal in the proximity of the 50 per cent retracement level from its preceding surge, indicating a price trajectory toward retesting the recent peak established in September this year. "According to price action theory, a visible W pattern has manifested on the weekly chart, affirming the continuation of a bullish trend in the near term. The robust gain in the IT index is attributed to strong buying activity in
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