The IT sector companies in India similar to their global counterparts have topped earnings estimate and inn view of it analysts have turned extremely bullish on the sector. As per the calculation by Bloomberg, 12-month forward earnings estimates for the 50-member S&P BSE IT Index has notched higher to 4.6%, the most since October 2013.
This is after the net income at 4 of the country's 5 major IT companies even beat the most positive estimates. This comes as there is a demand surge for digital services as the pandemic has shifted the focus to automation, with analysts giving out the rationale of strong deals, upbeat management guidance as well as cost cutting measures for the reasons to be bullish.
Also, in July, Infosys as well as Wipro have witnessed a number of rating upgrades.
"We expect the IT sector's relative earnings out-performance to sustain for the rest of the 2021 fiscal year," Gautam Duggad, head of research at Motilal Oswal Securities Ltd. in Mumbai, wrote in a recent note. The sector is trading at a "reasonable" valuation given its free cash flow, return ratios and payout metrics, he added.
The index has surged over 20% in July alone compared to 9.2% advance on the Sensex.
Also, the rise in earnings for the tech industry comes at a time when the forecasts for the S&P BSE Sensex have been changed little.