At a time when the Indian market has been talking about commodities, banks, and rural stories, there is one sector that has actually surprised with its outperformance. The NSE-IT index is up by 18.58% in the last 1 year. But, hold your breath, the NSE-IT index returns since Jan 01st 2018 has been a healthy 10.23%. What has changed for IT?
Worst is finally over…
That appears to be a fair judgment to make especially considering that the global growth is gradually looking up. With the world GDP likely to grow at 3.9% and the US GDP to grow at 2.7%, one can safely assume that tech spending will also grow in tandem. EU and Japan are looking at quicker growth and that is also positive. Above all, global tech spending is emerging from one of longest dull phases. Indian IT needs to get more digital and less BFSI but they are already on the job.
Indian IT is getting digital…
If you look at the strategy of Indian IT companies like TCS, Tech Mahindra, Infosys and others the focus is seriously towards getting a bigger share of the digital cake. That is the good news. The focus of Indian IT is more on analytics, cloud, mobility, IOT etc. That means the growth should become more sustainable going ahead. Even valuations could actually get better from here on!
Rupee - The joker in the pack…
The markets may not be mentally prepared for a weaker rupee but that could be a reality in 2018. Fed rate hikes, weaker Indian Fisc, portfolio outflows and weak banks could combine to put pressure on the INR. That is good news for IT which relies on a weak rupee to grow its revenues and profits in dollar terms. Don’t be surprised if IT emerges the winner in 2018
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