The Nifty IT Index is trading at the sharpest discount to its historical average in a year as the rupee rebounds to near three-month highs.
The 10-stock index trades at 16.2 times its estimated earnings for FY19, a 7 percent discount to its five-year average price-to-earnings ratio, according to Bloomberg data.
To be sure, the Nifty IT Index rose nearly 22 percent in the last one year. It's also the top sectoral gainer in 2018 as the rupee depreciated against the U.S. dollar. The index, however, fell about 6 percent in the last three weeks when the Indian currency strengthened 4 percent against the greenback on lower crude prices. A weaker rupee is beneficial for IT companies as they bill majority of the U.S. and overseas clients in dollars.
All constituents of the Nifty IT index, barring Wipro Ltd. and Tech Mahindra Ltd., are currently trading below their 200-day simple moving averages—a popular measure of the long-term trend. Also, none of these companies are trading at or above their respective 50-day simple moving averages.
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