Mumbai: The Nifty IT index has risen 2% on Monday, May 18, as the IT sector witnesses a sudden reversal following the weakening of the Rupee. The export-focused sector has become the only major index to escape losses, as cyclical challenges due to the weakening domestic currency have affected the overall equity market.
Heavy institutional sell-offs have dragged the benchmark Sensex and Nifty down for quite some time now, with even the Nifty IT index falling over 7% in the previous four sessions. Today, the Nifty index has remained one of the strongest pillars of the market, given that almost 85% of its revenues come from abroad.
Rupee Collapses to an All-Time Low of 96.18
Driven by escalating US-Iran tensions and rising crude oil prices, the Rupee has depreciated to an all-time low against the dollar. But that has become a blessing for the IT service sector, which typically witnesses a 30-50 basis points operating margin expansion during such events.
Disruptive threats remain
This development remains a short-term opportunity, given the disruptive challenges facing the IT sector’s traditional service models. Even though Infosys, TechM and Coforge have managed to rally by under 3% today, there are numerous challenges that could affect the sector, with OpenAI and Claude entering in the market dominated by these companies.
The Nifty IT index, is anyways trading 26% below its 52 week high of 40,301.40, as these companies have used the weakening of the Rupee to gain higher valuations.
