How It Paid Off to Bet on the Uncertainties in the IT Sector - Chart Of The Day 13 April 2018 - Equitymaster
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How It Paid Off to Bet on the Uncertainties in the IT Sector
Apr 13, 2018


During the financial year 2017-18, the BSE Sensex delivered a return of about 11%. Blame the market correction that started in February for the modest returns.

However, the BSE IT index gained over 19% during the same period. Now, that's a significant outperformance. If you were holding some solid IT stocks last year, you have most likely fared better than the Sensex.

But last year, the markets were not as optimistic on the sector as they are now.

Look at the chart...

During the first half of 2017-18, the IT sector was among the underperformers, and it was lagging way behind the Sensex.

During the first half of 2017-18, the IT sector was among the underperformers, and it was lagging way behind the Sensex. In fact, until October 2017, the index was still hovering near levels seen in April 2017.

But once the mood of the market changed, the IT index not only recovered, but went on to outperform the Sensex.

In my premium newsletter Insider, the IT sector was my top pick since we launched the service in July 2017.

Now, the question is...

What gave us the foresight to recommend so many promising IT stocks?

I'll tell you the secret...

Last year when I had discussions with my fundamentals-based research team, I got a clear sense that the uncertainty and negativity surrounding the IT sector -- the H1-B visa problem, the global slowdown concerns, strengthening of the Indian rupee, high attrition rates, etc. -- was blown out of proportion. There was a good contrarian opportunity to buy 'uncertainty' when the markets were fearful of IT stocks.

Like I said earlier, it is during moments of 'uncertainty' that lucrative investment opportunities are created.

Data Source: BSE India

This Chart Of The Day was published in The 5 Minute WrapUp - Confessions of a Guilty Analyst

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