Hi,
The past year for IT hasn’t been great, in fact, the sector has been lagging behind NIFTY :(
However, looking at underdogs that are going to be stars soon are kinda our thing at Manifest Wealth so today we are looking at NIFTY IT to see if it can perhaps be ripe for a comeback?
Let’s Begin
All views are personal and for educational purposes only, please do your own research before investing and trading
Charts
NIFTY IT after rallying quite a bit since Covid lows starter to lose steam in Q1 of 2022, before being sideways since May’2022 to today.
Currently it shows no signs of significant momentum, and is pretty much still within the range, despite the market rising.
Infact, the index has underperformed the index by ~20%.
Valuations and Return Distributions
Currently the NIFTY IT is trading at 25.1x PE, 8.2x PB and has a dividend yield of 2.7%
In the past, basis the valuation multiple of PB and DY, the next 6M return was between 13-17% and the next 12M return was between 18-21%, both higher than the average next 6M and next 12M return for the study period.
However, if we look to add the current PE to the equation, the expectations go down significantly, with the next 6M return being ~6% and next 12M return being ~12%, both lower than the average next 6M and next 12M return for the study period.
Conclusion
“So how do I interpret this?”
Well, the answer to that is, there’s no clear signal as of today.
NIFTY IT has been stagnant in the past year and there’s no signs of increased momentum despite NIFTY rallying.
Valuations wise, while it’s well-placed basis 2 metrics, the current PE levels are above the study period average, signalling some caution.
So perhaps the thing to do here is to continue closely watching the sector for now, understanding that the comeback can happen soon, and utilizing this time to figure out what stocks from this sector can do well in the next rally.
Until next time, keep manifesting wealth.
Disclaimer 1: All above views are purely for educational purposes and are not to be taken as investment advice. Investment or trades taken of any kind based on this are solely the person’s risk and I bear no liability. Please consult a financial advisor before making any investments. All investments are subject to market risks.
Disclaimer 2: The views presented above are mine and not of any organization(s) I work with / am employed at
Sources:
NIFTY Indices
Trading View