Foreign institutional investors (FIIs) cut stakes in seven of the 10 Nifty IT stocks during the June quarter, only for the sector to stage a powerful reversal immediately afterward. The Nifty IT index has surged 16% so far in July, raising the possibility that institutional pessimism peaked just as beaten-down valuations, washed-out positioning and improving technicals prepared the ground for a rebound.
Apurva Sheth, head of market perspectives and research at SAMCO Securities, said the firm had flagged the opportunity on July 1, when pessimism around Indian IT was at its peak and the Nifty IT index was at its bottom. Valuations were below historical averages, earnings were reaching new highs, technical indicators were approaching long-term support and positioning was at multiyear lows, he said.
