Worst seems to be over for IT sector: Pankaj Murarka

economictimes.indiatimes.com:

«If you see large caps, the valuation have corrected about 20-25% and the valuation correction in mid caps and with even more steeper, something like 30-35%. More importantly, in early 2022, when everyone was trying to building an environment around steep Fed rate hikes, the apprehension was that the US economy will slip into a very sharp contraction given the magnitude of sharp rate hike that the US Fed was talking about,» says Pankaj Murarka, CIO, Renaissance Investment.Nothing extraordinary from TCS. Nothing great has come from Wipro or Tech Mahindra but markets are mighty excited that for IT the worst is behind. Is this indeed true? I would like to think so that the worst seems to be behind for IT services companies, primarily for two or three reasons.

One, from the time they peaked in late 2021 and early 2022, over the last 18 months, valuation in the whole sector has moderated very significantly. If you see large caps, the valuation have corrected about 20-25% and the valuation correction in mid caps and with even more steeper, something like 30-35%.

More importantly, in early 2022, when everyone was trying to building an environment around steep Fed rate hikes, the apprehension was that the US economy will slip into a very sharp contraction given the magnitude of sharp rate hike that the US Fed was talking about. But the fact is now fast forward 18 months, we have had very steep rate hikes from Fed, one of the sharpest rate hikes that we have seen in history and yet US economy has turned out to be far more resilient.