The IT sub-index of National Stock Exchange has gained nearly 12 per cent this year, under-performing the Nifty which has gained over 25 per cent in the same period. The IT stocks however are likely to be back in favour as the rupee is likely to feel the pressure from US rate hikes, says Emakay Global Financial Services.
Dhananjay Sinha, head of research at Emkay Global Financial Services said from the speech of US Fed chief Janet Yellen at Jackson Hole it is likely that the Fed could increase interest rates earlier than expected.
Mr. Sinha believes that dollar is likely to appreciate as the US Fed is expected to raise rates early next year. “I think the rupee could actually weaken further, we can expect rupee going to 62-63 levels,” added Mr. Sinha.
The Reserve Bank of India would also allow gradual depreciation in rupee; said Mr. Sinha which could boost stocks of exporters in IT and pharma sectors.
In the IT sector, Emkay believes that large-cap companies like TCS and Infosys will do better. “We do expect that the top-line growth and volume growth continue to be there,” added Mr. Sinha. However, he said that midcap companies in the IT space would be under some stress as they are at the peak of their margins now.
