IT Sector in 2018: Tech czars made investors richer; check top tech triggers to takeovers
Information Technology sector has performed exceptionally well in the year 2018. The robust jump in trade volume and increase in half yearly guidance has made it one of the better sectors in 2018 for investors. Rohit Singre, Sr Technical Research Analyst, LKP Securities said, "IT index has given close to 35 to 40 per cent returns from January to September this year." He added, "Though its trading below the peak levels of 16,000 in September 2018. IT still is a buying option for investors."
Singre believes that IT index has not just performed well throughout this year, it is likely to break the levels of 17,200 in 2019. Currently, it is trading at 14,385 level.
Singre explained, "IT index has shown a sideways trend since January, 2018, when it was trading at 11,600, to a peak of 16,500 in September. However, major correction in rupee to 74 per dollar took index down to 13,500 later in the year."
Many sectoral giants flooded buyback offers of their equity shares during the year. TCS announced the buyback of equity shares for Rs 16,000 crore, HCL Tech announced Rs 4,000 crore for its shares, even as Mphasis declared a buyback offer of Rs 1000 crore in 2018.
"TCS has majorly driven domestic IT sector with a robust returns of over 40 per cent" Singre told Zee Business Online.
Apart from these major events, there were some noteworthy acquisitions that took place in the sector.
1. HCL Tech's acquisition of IBM Soft for Rs 12,500 crores.
2. Infosys aquired Fluido for Rs 545 crores.
3. Mphasis acquired Stelligent for 125 crores.
4. Cyient's acqusition of AnSem for 114 crores.
5. IT giant, TCS acquired Bridgepoint.
Performance: Nifty50 Vs Nifty IT
2016: NSE Nifty 50 rose 2.19 per cent, while Nifty IT showed negative returns of around 9.40 per cent in the year.
2017: Nifty 50 jumped 32.66 per cent, while IT witnessed a positive surge of 13.12 per cent in the year.
2018: Nifty 50 witnessed a return of mere 2.54%, however Nifty IT climbed 26.70 per cent in the year.
Heroes of the sector:
1. NIIT Tech: NIIT Tech has given whopping 80 per cent returns during year 2018.
2. L&T Tech: Larsen and Toubro Tech was the second best with a robust 74 per cent returns.
3. L&T Info: L&T Info fetched shareholders over 73 per cent returns.
4. TCS: Tata's TCS, the IT giant gave over 46 per cent returns during year 2018.
5. Mind-tree: Mind-tree let the shareholders enjoy 45 per cent returns.
6. Tech Mahindra: Tech Mahindra has given 44 per cent returns in the year.
Zeroes of the sector:
1. 8K Miles: 8K Miles was the worst performer, as it gave negative returns of 84 per cent.
2. Infibeam: Infibeam was the second worst performer with negative 72 per cent returns.
3. Axis-cades: Axis-cades lost 58 per cent in the year 2018.
4. HCL Info: HCL Info moved down by 57 per cent in the year.
5. Ramco Sys: Ramco Sys dipped 49 per cent in 2018.
"Index has formed a rounding top bottom and might bounce again towards 16,000 in future. According to pivot charts, there is a strong support at 13,500, while has tendency to break 17000 as well." Singre added.
Triggers for the year 2019:
1. Companies will again focus on buyback offers for the equity shares in the year 2019 as well.
2. American expenses are expected to rise further
3. Appreciation of the domestic currency rupee, will impact positively for the first half earnings of the companies.
4. Reduction in government orders to be expected.
5. Operations of the companies will likely to impact due to Brexit.
"IT sector of India still deserves a buying tip for 2019, as rupee is expected to recover further in future.'' said Singre.