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As rupee nearly recovers 2021’s losses, calibrate your move towards IT, pharma stocks now….
As the rupee holds on to 73 levels against the US currency, is it wiser to avoid exporters such as IT and pharmaceutical companies, which derive the majority of their revenue from overseas markets?
Indian IT stocks, which have contributed much to the market rally recently, are in no mood to take a breather. But is the recent strength in the rupee against the US dollar a warning sign for the IT basket?
Strength in the rupee — though a boon for importers such as oil companies — affects the profitability of Indian IT and pharmaceutical companies, which derive the lion’s share of their topline from foreign markets.
Nifty IT has outshined NSE’s sectoral indices this year with a return of 46 percent.
IDBI Capital Markets, remains bullish on IT companies with demand for technology expected to remain robust thanks to the pandemic.
“Almost every industry is increasing its technology spending in order to be resilient and flexible and cutting operating expenses. The acceleration of digital transformation in the US, the UK and Europe is benefiting Indian IT companies,”
“Developments in technologies such as artificial intelligence, machine learning, robotic process automation, edge computing and 5G are driving digital transformation,” Experts said tech spends are expected to remain a critical enabler for enterprises in the new normal.Nifty IT has beaten the headline Nifty50 benchmark by a wide margin so far in 2021, with a year-to-date return of 46 percent. Here’s how its 10 components have fared:
|Stock||YTD Return (%)||Sept 7, 2021||Dec 31, 2020|
The stock of Tata Consultancy Services (TCS) — the country’s largest IT services company — has risen 34 percent so far in 2021, backing the IT index’s stellar return of 46 percent. IT has the second-largest weightage in the Nifty50 benchmark, after financial services
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