Dolat Capital: IT Outperformed As Stocks Re-Rates; Time To Get Selective

BQ Blue’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages. These reports offer BloombergQuint’s subscribers an opportunity to expand their understanding of companies, sectors and the economy..Dolat Capital Report.Information Technology Services companies have seen significant run-up in last three months with CNX IT rallying 24% and outperforming Nifty by 10% during this period – we called this out in our Thematic note on Digital Acceleration theme wherein we recommended to go overweight on the sector.During this period most institutions increased their weightage in the sector by approximately 180 basis points on average basis in last three months.Weightage on IT stocks is now just below 150 basis points compared with BSE500 (12%) as against Underweight of about approximately 300 basis points as of May 31, 2020.However, with IT Index now at 20% higher than Pre-Covid-19 levels despite average earnings compression of about 7% (for FY22) for our coverage universe implies expansion in earnings multiple by approximately 35% during this period.This re-rating has taken the valuations of stocks closer/higher than its +2 Standard deviation of its three year Median PER.Hence, at these valuations, we see limited room for further material upsides. Rather, we believe that the elevated valuations make them vulnerable to the potential risks of second order impact on the earnings and thus would prefer to wait for better entry points in these names..Click on the attachment to read the full report:.DISCLAIMERThis report is authored by an external party. BloombergQuint does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the brokerage and do not represent the views of BloombergQuint. .Users have no license to copy, modify, or distribute the content without permission of the Original Owner.

Dolat Capital: IT Outperformed As Stocks Re-Rates; Time To Get Selective

Dolat Capital: IT Outperformed As Stocks Re-Rates Approximately 35%, Time To Get Selective

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