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On This Day - Aug 19, 2017
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Underperformance of Top IT Stocks

Speaking of timeless stocks, the IT sector was much favored amongst investors since the turn of the decade. IT giants like TCS, Infosys were considered a safe bet at any price. With Infosys' CEO's resignation yesterday, it caps off a miserable 3 year run for IT stocks.

The top 4 IT companies have underperformed the benchmark. With the sector heavily dependent on US customers, Trump's protectionist policy announcements have further dampened the mood in this sector.

Also, with automation on the horizon, Indian IT companies' low cost labor outsourcing is turning into a thing of the past. IT companies need to re-invent itself.

Automation is needed in their traditional businesses like BPO, application management, and infrastructure management.

While near term challenges are there, current valuations of top IT companies are at multi-year lows. But is this the new normal? The challenge is to find the companies better placed than others to adapt to this structural change.

Data Source: BSE, Ace Equity


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