Although the long-term history of banking and information technology is fundamentally intact, investor preference seems to be tilting in favor of short-term banking stocks. At a sector level, both have a high weighting in Sensex and Nifty.
Motilal Oswal equity strategist Hemang Jani said IT stock investors were worried about the impact of aggressive rate hikes and the possibility of a significant slowdown in the US economy. He fears more pain for IT stocks until the growth cycle in US IT spending is clear.
TCS’ first quarter results indicated margin pressure for the industry. The IT exporter’s operating margin contracted 2.4% year-on-year (YoY) to 23.1%. HCL’s EBIT margin for IT services decreased by 180 basis points quarter-on-quarter (QQ).
also warned of a slowdown in its business in Europe.
“ Back to recommendation stories
Global brokerage Nomura, which is cautious on India’s IT services sector, believes that FY23 will be marked by greater disappointment in margins and FY24 by disappointment in revenue growth, which should both be adequately addressed by consensus.
In the past week alone, TCS and TCS have lost around 8.7% each. , and are down more than 4% each in a week.
Bank stocks, however, are finding favor amid higher corporate growth, NIM expansion amid rising interest rates and accelerating credit growth.
The NIM or Net Interest Margin is expected to increase as the yield on advances would have increased faster than the cost of deposits due to the immediate repricing of repo rate linked loans.
“We expect the quarter to be strong for the banking sector as a whole and we expect the large private banks to outperform. lending, improving NIMs and moderating credit costs,” he added.
In the past month alone, the stock of
is up by more than 9%, 6.4%, 3.4% and 2.8%.
Nilesh Shah, MD,
Mutual Fund said the big banks are capturing most of the credit growth. “There is consolidation, NIMs are growing and NPAs are weak. I think all of this put together creates a huge opportunity for the banking industry to outperform the market,” he told ETMarkets.
(Disclaimer: The recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)