IT stocks are beginning to offer bank FD-like dividend yields. But is that a trap for investors?

India's once-prized IT stocks are now beginning to pay dividend yields that rival a bank fixed deposit but that should worry you more than it comforts you. The top five IT companies now offer an average dividend yield of 4.9%, with Wipro at 5.7%, HCL Tech at 5.6%, TCS at 4.9%, Infosys at 4.7% and Tech Mahindra at 3.6%. These yields haven't climbed because companies are paying out more. They've climbed because the stocks have collapsed.

TCS, Wipro and LTIMindtree are all down at least 50% from their all-time peaks, and Nifty IT is languishing at multi-year lows. A falling stock price mechanically pushes the dividend yield higher and so what looks like an income opportunity is, at its root, a scoreboard of how much wealth has already been wiped out.