So far, in 2022, the Nifty IT index has declined 28%, while the Nifty Bank gained 16% to an all-time high on Thursday. The Nifty has risen 3% in this period and is about 4% away from its record high.
“The banking sector is seeing good interest after an underperformance in the past 2-3 years. Robust earnings growth coupled with improving credit growth and clean-up of asset quality along with reasonable valuations is helping the sector,” said Gautam Duggad, head of research, . “In IT, concerns around a US recession and continued interest rate hikes are souring the sentiments.”
In 2021, the Nifty IT index surged 60%, while the Nifty Bank index gained 13%. The Nifty jumped 24%.
Foreign portfolio investors’ (FPIs) investments in the IT sector declined 26% since April this year to ₹5.11 lakh crore from ₹6.90 lakh crore. In contrast, their assets in the financial services sector rose 11% to Rs 15.19 lakh crore during this period.
The top five IT stocks –
, , , , and – plunged 16% to 42% so far in 2022, whereas the top five banks’ stocks have gained by 3-24% in this period.
“With credit growth picking up and asset quality issues behind us, it is time for the banks to play catch-up. We expect banks to lead the next leg of the rally along with auto and engineering sectors,” said Gaurav Dua, head – of capital market strategy, Sharekhan.
“On the other hand, the IT sector could remain a laggard in the immediate future, but it would be an opportunity to buy with a view of 24 to 30 months.”
According to Vinod Nair, head of research at
, the Nifty Bank index is still attractive and trading marginally above the long-term averages even after factoring in the current rally. “We continue to have a strong long-term outlook for the banking sector, especially for large private banks.”
