August does not seem to be a good month for IT stocks. Earlier this month, Infosys shares hit a 52-week low and now it is Wipro. If a single quarter is below expectations, it can hit the share price badly.
The shares are now trading at Rs 485, after having hit a 52-week low of Rs 477 on Aug 29.
Here are a few reasons why the stock has been hit hard.
Wipro Shares At 52-Week Low; Should You Buy Now?
Most IT companies, apart from HCL Tech reported numbers that lagged estimates. There are worries that things may not be as bright as they seem. Almost all of the shares from the IT sector have dropped, as investors churn their portfolio. Infosys earlier this month hit a 52-week low of Rs 1009.
Energy Business Hit
Some of the top clients of Wipro are from the energy sector and we all know how crude prices are languishing. As crude prices fall, budgetary allocations would be a problem and hence IT companies like Wipro would be hit.
Guidance is always what analysts wait for. The Wipro guidance made in the last quarter, has been marginally below expectations.
Sentiments not the best for IT companies
TCS and Wipro too delivered numbers that were below estimates, which has overall affected sentiments for IT stocks. In fact, even HCL Tech, another biggie from the sector, has seen its stock fall.
Best quarters are April to June
Most IT companies report the best numbers from April to June and July to Sept quarters. However, the first quarter was a big letdown, even from mid sized IT companies like MindTree.
Should you buy the share now?
It's difficult to say how much more downside risk exists.
Look for stocks from fast growing sectors that might outperform.
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