Despite the recent fall in the stock market and brokerages expecting a muted Q3 on the back of wage hikes, high attrition, visa costs, and a strong rupee, the IT sector in the country has still given robust returns in 2019.

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The Nifty IT has risen around 10 percent in 2019 with over half its constituents in green. In comparison, the Nifty has gained nearly 13 percent this year.

Among Nifty IT stocks, NIIT Tech has surged the most, up over 37 percent in 2019. Meanwhile, TCS has rallied 19 percent and HCL Tech has gained 18 percent this year. Just Dial has advanced 16 percent, Infosys has risen 11 percent, Tech Mahindra is up 8 percent, and Wipro has added 2 percent to its stock value.

Among losers, Tata Elxsi has is down 15 percent, MindTree has fallen 10 percent and Hexaware Technologies has slipped 0.2 percent during this time.

Analysts remain cautiously optimistic for the sector with a long-term view as the sector may witness some headwinds in the near future. "The dichotomy/mixed signals in the commentary between Indian IT (cautiously optimistic) and global tech (cautious) reconciles with the growth outperformance of Indian IT. Yet, despite the pivot to digital, there will be ‘first among equals’ within Indian IT as the global macros continue to be challenging (BFS, retail)," said HDFC Securities in a report.

The investments in localisation, re-skilling, platform and partnerships, and mergers and acquisition to align with changing business and addressable market have supported growth, despite tight enterprise budgets, it added.

Global brokerage Morgan Stanley, however, is 'underweight' on the sector. It said that business momentum has been strong, but stocks have re-rated and recent outperformance probably prices in the strong growth.

"Client-specific issues persist across specific sectors and budget expectations for 2020 reflect a sharp slowdown in IT spending. Consensus estimates have downside risks and could hamper stock performance," the broekrage said in a report.

Further, the broekrage does not see a material upside to growth estimates against the current macro backdrop. It is 'overweight' on Tech Mahindra, L&T Info, Mphasis, Cyient, and Just Dial, 'equal-weight' on TCS, Infosys, and Hexaware, and 'underweight' On Wipro, HCL Tech, and MindTree.

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First Published:Dec 23, 2019 3:29 PM IST