This is IT

The IT industry is one of the few sectors that has remained out of favour for the whole year. Since Jan 2016, the Nifty has risen by 14.29 per cent. The IT Index however, is down by 7.7 per cent. The extent of the underformance can be gauged by the following chart where both indices are normalised. The underperformance started in June - until then, the returns were pretty close. In June , fears of Brexit took hold and the IT Index has lost 5.07 per cent since late June when the referendum results were known. The Nifty has risen by 7.91 per cent since then. The underperformance is marked because nothing like this has happened in the past few years. Since 2014, the Nifty has outperformed the IT Index. But the IT sector and the broad market have generally moved in the same direction. It is only in the period since June 2016 that the divergence between the general market and the IT sector has become marked. Brexit triggered a sell-off in IT stocks. Analysts said Indian IT companies would be hit hard. Morgan Stanley specifically mentioned seven Indian companies among 30 global majors, which it said would hurt most by the Brexit because of the high exposure to the UK and to the European Union. Of these seven, five were IT stocks, namely HCL Tech, Wipro, TCS, Infosys and Tech Mahindra. (The other two companies were Tata Motors and Godrej Consumer Products). Indian IT companies have used the UK as a springboard to locate headquarters of EU-fac

This article was originally published on October 24, 2016.