Year-ender 2023: Smallcap IT stocks outpace largecaps this year; will the latter rebound in 2024?
The Nifty IT index has given a staggering 25% returns year-to-date (YTD) despite periods of downturns, outperforming the benchmark Nifty 50 by more than 7%.
Similarly, the BSE IT index has rallied more than 26% in 2023, compared with the 16% gains in Sensex.
But if one looks at the performance of the sector, then the outperformance is not broad-based among stocks.
Smallcap stocks have given stellar returns and outperformed the largecap peers by a wide margin.
Atleast 19 smallcap IT stocks gave multibagger returns of upto 513% in 2023, data by Ace Equity showed.
Further, of the 19 stocks, 18 of them hit lifetime highs as well this year.
Much of the gains in smallcap IT stocks have been due to the broad-based rally in the smallcap segment in 2023. The S&P BSE Smallcap index, a barometer of the performance of smallcap stocks, has rallied 45% year-to-date.
While the broad-based gains in the smallcap space has contributed to the rally in IT stocks of this segment, some of the stocks have been backed by strong institutional buying and robust earnings performance.
RateGain Travel Technologies is one such stock which has seen consistent buying by both mutual funds and foreign institutional investors. This drove a 159% rally in the stock in 2023.
The strong recovery seen by the travel and hotels sectors post pandemic has aided the business for the company, which primarily provides software solutions to these two sectors.
Largecap Show
The initial months of 2023 saw largecap IT stocks lag as companies offered a bleak outlook for earnings growth in the backdrop of a slowdown in technology spending in key export markets. The steep cuts in guidance by companies like Infosys and HCL Technologies triggered major earnings
