Hi All,
10 Year price CAGR analysis for TCS is as below:
March 2017:14.92%
March 2018:20.75%
March 2019:29.82%
March 2020:15.01%
This is also due to suppressed prices during April 2018 to March 2009.
Excluding 2018 & 2019, which was on the low base of March 2008 and March 2009, when most of the stocks including IT were corrected, it is marginally better than NIFTY.
Hence, it seems that, in IT sector, you need to select stocks carefully. Entire IT pack may not perform well, but some specific IT companies may do well.
This is similar to all other sectors as well.
Entry and Exit points are also important in IT stocks.
Broadly it is secular sector but from time to time, it can throw surprises of low returns due to rupee appreciation (this happened in 2015 to 2017 to some extent), Visa issues (again during 2015-2017), Margin contraction and mass lay offs (2015 to 2017).
One need to be very careful with valuation of IT companies, and should not get carried away by stories which are floated around. Having worked in large IT companies myself, I am aware that, there is tendency of the managements to panic when margins drop by few basis points, and immediately lay offs start. This is one of the main reasons of low confidence of general public in IT companies and sector in my opinion.
Many people which work in IT industry also have some exposure to IT sector since they receive large ESOP(s). In spite of such large ESOP(s), Retail investment in the sector looks low. So one need to understand the risks involved in this sector.
I am just trying to be realistic about IT sector valuations. I will continue to study the sector further and if my views about valuations change, I will certainly write about it.
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