Many Industries have suffered due to COVID-19 or Corona but IT sector has been almost unfazed by this pandemic , while sectors like Auto had suffered heavily due to reduction in consumer spending and due to lockdown restrictions not just in India but also worldwide the IT sector companies have somehow achieved success in getting out unscathed from this pandemic with minimum losses.
Some might argue that at the beginning of the pandemic the IT sector companies had laid off hundred or thousands of employees but these lay offs were mostly limited to medium to small sized IT companies , IBM’s Indian arm laid off few thousands of people together with cognizant which also did performance based lay offs , meanwhile reputed and IT sector giants like TCS , Infosys , Tech Mahindra , Wipro , HCL haven’t resorted to layoffs even in such dire times which is truly an indication why these are the IT giants .
The IT sector companies have had fair share of disruptions during the pandemic due to concerning situations in USA and the EU , foreign clients of Indian Companies had halted their business activities or applied a little break but even that has not been able to halt the momentum in the IT company stocks in India.
Outperformance by Infosys and TCS-
If you look at the technical chart of Infosys and TCS you can clearly see how they have given consistent return even during the pandemic and if an investor had invested any amount in both the companies the amount would have been simply doubled that is one has got 100% return in both the companies.
Above is the daily technical chart of the Infosys as on NSE , this chart shows that Infosys was around 550 Rs in March when COVID had just begun and was spreading rapidly , the infosys stock went from 550 levels to Rs. 1280 as on fourth January 2021 , that is Infosys stock has literally doubled , one does not simply see heavyweights like Infosys doubling in less than 9 months .
The technical chart of TCS as on NSE is also very similar and shows how TCS has literally doubled from its level of 1600 to almost 3000 as on writing this article , very few stocks have given such run in the pandemic , most have been plagued by news of rising corona cases or rising restrictions during the lockdown but IT sector has somehow turned the tide in their favor, in factif you look at the technical charts of other companies like HCL tech and Wipro their charts are also very similar thus its not specific stocks that have outperformed its the whole sector !
Reasons of Outperformance –
The main reason of IT sector outperforming is that the IT sector was already equipped with dealing in such catastrophe , they had their own infrastructure ! the biggest harpoon for them turned out to be the WFH culture , work from home has been one of the biggest cultural changes in recent months , almost 90 percent of the IT employees have been working at home for months now , this certainly cuts down many costs for company like electricity bills and other various miscellanies costs which certainly affects the balance sheet of the company in a good way , also IT employees have reported that the work load has increased as now they are even assigned some random work at even 10 pm in the night , now they don’t have any excuse because they are at home and thus companies have started squeezing even more productivity from their employees.
TCS has even declared that by 2025 75 percent of their employees will be working at home permanently , and only 25 percent employees whose work is related to the physical IT infrastructure will be required to come to physical offices , many companies have also wished to implement such WFH guidelines for their employees.
Also one of the main reasons for outperformance was that during the peak of the pandemic everyone was literally relying on IT infrastructure , from ordering their whole month groceries from Grofers to using Zoom or google meet for their meeting , IT has literally kept the things from turning out even worse.
So IT sector stocks have any momentum left or not ?
IT sector stocks have still much more fuel left in them in fact recently Infosys and TCS has signed billion dollar deals with Daimler and Walgreens boots , which are pretty huge deals considering that we are in a pandemic driven state where future seems a little unpredictable , signing of such huge deals indicate that much more such deals may come as the economies recover and as lockdown restrictions are eased and the vaccines are rolled out.
Recently Accenture in USA posted very strong financial results for November quarter which led to rally of tech giants like Infosys , Wipro and TCS in the Indian stock exchanges , results of these companies are also due within a week or two and these companies are expected to present strong financial results hence even now IT sector stocks are a great buy and can be bought for swing trading purpose till declaration of financial results and the present rally also indicates that insiders have already made their positions for reaping the benefits of strong financial results .
Though after declaration of financial results the IT sector stocks might witness some profit booking but still they can be bought on dips , those investors or traders who doesn’t want to buy now can wait for any dips after quarterly results and then buy in such dips.
I recently had traded in the Infosys and will post about the technical setup that gave me 10 percent results in my swing trade , that post will be in a video form and will be posted on my Youtube channel so make sure to subscribe the channel.
Disclaimer – Note that stocks mentioned above are in no way a recommendation from our organization , we are not a sebi registered organization and we would not be responsible for your losse s.