[wealthdesk shortname="TCS" isinid="INE467B01029" bseid="532540" nseid="TCS" sector="Computers - Software" exchange="nse"]

A sharp overall recovery on Dalal Street in the past few weeks has brought the Nifty50 within four percent of its all-time high of October 2021, but one space still has a lot more ground to cover before participating in the market rally. Experts are divided over whether the pain in the Indian IT basket has maxed out or not.

The Nifty IT — whose 10 member stocks include TCS, Infosys, Wipro, Tech Mahindra and HCL Tech — has slumped 23.5 percent so far in 2022, sharply underperforming the Nifty50 benchmark.

<img class="aligncenter size-full wp-image-14515272" src="https://images.cnbctv18.com/wp-content/uploads/2022/08/Aug-18-IT-pack-.jpeg" alt="" width="884" height="459" />

Weakness in the IT basket on the Street comes at a time when major players see robust growth in revenue but high levels of attrition — causing elevated employee costs — continue to <a href="https://www.cnbctv18.com/education/it-hiring-changes-infosys-tcs-wipro-tech-mahindra-hcl-tech-jobs-14299142.htm">eat into their margins</a>.

<img class="aligncenter size-full wp-image-14515312" src="https://images.cnbctv18.com/wp-content/uploads/2022/08/Aug-18-Small-IT.jpeg" alt="" width="884" height="366" />

The IT index — which also has L&amp;T Tech, L&amp;T Infotech, Mphasis, Coforge and Mindtree among its constituents — remains deep in the bear territory. A stock or index is said to be in the bear zone when it is at least 20 percent below its high.

Andrew Holland, CEO of Avendus Alternate Strategies, is of the view that there are not enough tailwinds for IT companies.

"I just do not think there is enough tailwind for the sector given that it's just following what is happening in tech stocks in the US. Unless you have a very strong view. I am not saying any of these stocks are bad, but there is a catalyst at the moment when global economies go into recession," he told CNBC-TV18.

<img src="https://pbs.twimg.com/media/FSScTaqacAAaQcG?format=jpg&amp;name=medium" alt="Image" />

"If you have a very positive view that tech stocks in the US are going to start doing well, which I don't, then I think this rally in IT stocks again will probably fade as markets correct,” he said.

Here are a few highlights from the April-June report cards of major Indian software exporters: 

Margin

<img class="aligncenter size-full wp-image-14516212" src="https://images.cnbctv18.com/wp-content/uploads/2022/08/Aug-18-Margin-.jpeg" alt="" width="796" height="465" />

Attrition

<img class="aligncenter size-full wp-image-14515652" src="https://images.cnbctv18.com/wp-content/uploads/2022/08/Aug-18-Attrition-1.jpeg" alt="" width="704" height="575" />

Revenue

<img class="aligncenter size-full wp-image-14516202" src="https://images.cnbctv18.com/wp-content/uploads/2022/08/Aug-18-revenue-growth.jpeg" alt="" width="796" height="465" />CLSA expects attrition in the IT space to optically moderate by the quarter ending December 2022. It also sees the downgrade cycle pausing in the near term.

<img class="aligncenter size-full wp-image-14515332" src="https://images.cnbctv18.com/wp-content/uploads/2022/08/Aug-18-CLSA-IT.jpg" alt="" width="1481" height="833" />

The brokerage has TCS, Infosys and HCL Technologies as its preferred picks in the sector.

Among the optimists who believe the IT pack can participate in the overall market rally soon is Chirag Kachhadiya, Lead IT Analyst at Ashika Group.

"The Indian IT space is participating actually since the return of FIIs (net buying of Indian shares) in the last one month and this time it will be stock-specific rather than in whole sector," he told CNBCTV18.com.

<a href="http://www.cnbctv18.com/market/stock-market-live-update-share-today-nifty-sensex-syrma-ipo-sona-blw-fed-14511252.htm">Catch latest market updates with CNBCTV18.com's blog</a>

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Except TCS and Infosys, big IT stocks far from peaks — how soon they may join the party

By Sandeep Singh Aug 18, 2022 3:45:21 PM IST (Updated)

The Nifty IT remains in the bear zone — which means more than 20 percent from its recent peak — with a majority of constituents except TCS and Infosys far from their highs. Experts say it may be a little longer before one can expect a comeback in the space.

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