IT Sector Q3 Earnings Preview: Compressed Transformation To Offset Seasonality; Focus On FY22 Strength, Says Nirmal Bang
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Nirmal Bang Report
In Q3 FY21, Nifty IT index underperformed Nifty by 280 basis points, while it outperformed Nifty by a whopping 4000 basis points in CY20.
The underperformance of Nifty IT in Q3 FY21 can be partly attributed to the already strong run-up in valuation (which was at 10-12 year high) prior to the start of the quarter.
Also, it was offset by the outperformance of heavyweight Nifty Bank vis-a-vis Nifty by 2140 basis points.
One of the reasons for the outperformance of IT vis-a-vis Nifty in Q2 FY21 was outflow from banks on concerns surrounding asset quality. We think those concerns may have diminished in Q3 FY21, leading to Nifty Bank’s sharp upmove.
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