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Many times, the street tends to make a bucket of stocks and a narrative gets created that that these stocks have similar characteristics and hence they tend to move in a similar direction. While this might be correct for some time, but over a period of time, especially when there are headwinds, some companies either diversify into new areas or for any other reason, while the mother set of characteristics remain the same, they become different from each other. Let's take the case of mega cap or the top five IT companies, while the narrative is that they are all the same, the fact is the stock of HCL tech is much higher than what it has formed in the last quarter of 2021 which was the time when all other mega cap IT stocks touched a new high. Essentially, even the companies which look very similar could be very different, in business and their stock performance could also be very different.
Frontline IT companies report mixed Q3 earnings, but analysts anticipate a recovery in the next few quarters as green shoots emerge. TCS sees pent-up demand and growth in banking and financial services, while Infosys has deal ramp-ups on schedule. HCLTech observes green shoots in ER&D and expects strong deal bookings. Wipro notes demand stabilization and slight pick-up in discretionary spending.
Year 2024, started with contrarian buy call by note by a large foreign brokerage and the impact on the IT stocks is visible as they stand out in green territory. One of the basic principles of figuring out whether the stock prices have bottomed out or have topped out is how they react to the negative and positive news. It is after a long period of time that IT stocks have reacted to positive news. When news is bad and most are skeptical it is time to look at businesses which have a track record of delivering and have strong balance sheets but due to some reason out of favour. Stock Reports Plus, powered by Refinitiv, is a comprehensive research report that evaluates five key components of 4,000+ listed stocks - earnings, fundamentals, relative valuation, risk and price momentum to generate standardized scores.