Demand for IT stocks in India | Benefits of investing in IT stocks | Motilal Oswal
Demand for IT stocks in India | Benefits of investing in IT stocks | Motilal Oswal

Why are IT stocks in demand

Trading in stock markets is not an easy game. One has to spend a lot of time in researching about the stock and its trend over the past few months and years and the most important of all, the influence of the movement of BSE Sensex over that stock. While there are a number of sectors which are influenced by the stock exchange’s rise and fall, the IT stocks are the most preferred ones by the traders. Has anyone wondered why and from when did it start?

It was in the year 1981 that seven engineers from Patni Computers resigned from their jobs and laid a foundation for a company which soon became the face of our country’s IT industry. The company was Infosys Ltd which was not the only IT firm that started its journey in 1980s. Within a decade there were many companies which laid a strong foundation to the billion dollars IT industry in India and the trend still continues. Some of the software stocks have fulfilled the traders dream to earn good by rising in multifold within a real short period. This can also be named as one of the reasons for the demand of IT stocks.

There are quite a number of reasons to justify the demand for the software stocks in India. Traders can also observe that when there is a slight bullish trend with the BSE Sensex, the BSE IT would see a much higher plunge. This shows the preference of the traders for the IT stocks and this especially holds true with the markets that are highly volatile and fluctuating.

Let us now have a look at some of the reasons as to why the IT shares are always in demand.

The Exports
The IT companies in India have a major portion of their earnings from foreign markets and this means that these companies earn in foreign currencies. With the depreciation of rupee that occurred in 2013, these export oriented companies earn more due to the currency conversion. This is the one of the main reasons for the demand of IT stocks. As per Nasscom, these exports are sure to see a rise in the coming fiscal years.

The Markets of US and Europe
The two regions of United States and Europe are known to be the biggest markets for IT companies in India. It has been stated that US itself has contributed to more than two-thirds of the total IT exports in India, worth about $76 billion. A number of Indian IT companies are quite optimistic about the US business environment and this certainly means that the companies in US will spend more for the IT services and this in turn will drive up the revenue.

A similar trend exists with the European clients too as they are now more than willing to offer the contracts to IT companies from offshore. With this, one can even expect a rise in the exports to Europe this fiscal year. This also implies that the IT companies from India are penetrating well into the markets and this will help increase the revenue growth for the IT companies in our country.

The Revenue Growth
There are a number of IT companies that are quite confident about meeting their growth targets with respect to revenues. The IT industry as the whole is expected to see a growth of 12-14% in their revenues. With the improved penetration of Indian IT players into the global markets like BPO and IT management systems, the IT industry is sure to get a boost. The companies are also adapting to the in-demand new services of cloud computing, social media, data analytics and mobility, and this can be termed as one of the main reasons for the growth. This also means an additional source of revenue for these companies in the Indian IT sector.

The above mentioned are the most important reasons as to why the IT stocks are the most preferred ones by traders. The IT stocks give better returns on the money invested and the price trends too can be predictable with ease when compared to the stocks from other sectors.

If you haven’t tried trading in IT stocks yet, it is the time to choose some of the best performing IT stocks and start trading. If you are a beginner in trading, just open an online trading account today and start investing.

 

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