IT stocks have been on a bull run in the last 1 year despite obstacles from the COVID-19 pandemic. FY21 was the best year for the Nifty IT index in a decade with the index surging over 102 percent in the year. The index also outperformed benchmark Nifty, which rose 71 percent in the year.

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For 2021 as well, the index has outpaced Nifty rising 12 percent YTD versus a 6 percent rise in the benchmark.

The gains in the index is reflected in the bullish views of the investors as well as analysts on the sector as the pandemic led to an increase in digitalization during the year.

Among individual stocks, HCL Technologies, Infosys and Wipro more than doubled investor wealth, surging over 100 percent each while Tata Consultancy Services and Tech Mahindra advanced over 70 percent each in FY21.

Most brokerages believe that the sector will continue to deliver better growth in the March quarter following the strong performance in the December quarter.

For the March quarter, Reliance Securities expects the revenue momentum for the IT space to remain strong on the back of deal ramp-ups. Deal environment is also expected to remain robust backed by consistent technology spend on digital services by the global enterprises, it said.

"Whilst profitability is likely to remain elevated, we expect relatively lower EBIT margin owing to likely increase in employees’ incentives and step-up in employee onboarding. We expect strong topline guidance and end-market commentary from Top-8 IT companies under our IT sector coverage universe," the brokerage stated. TCS, Infosys and Tech Mahindra remain the top pick for the brokerage in this space.

Meanwhile, HDFC Securities said that the sector is expected to post its decade-best Q4 sequential performance. The pandemic has evidently accelerated the digital transformation agenda and key lead indicators remain positive, it added.

“The IT sector is trading at 1.5 times historical multiples. Positive stance on the sector is premised on the longevity of high-growth supported by multi-year industry tailwind from shift to cloud, increasing competitive advantage leading to continued market-share gains," the HDFC Securities note stated.

Prabhudas Lilladher also believes that the ramp-up of previously signed large deals, broad-based growth and tailwinds from cloud transformation to help the IT Sector post another stellar quarter. It also expects a strong hiring trend, utilization levels to drop sequentially and focus on offshoring to continue.

It sees TCS, Infosys, and Wipro leading growth in Tier-1 group and L&T Info, Mindtree and L&T Tech in Tier-2.

(Edited by : Abhishek Jha)