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Time to Buy the Dip in IT Stocks

Jul 25, 2022

The IT index has corrected over 30% from its all-time high of 39,446.

IT giants like Infosys & TCS fell over 25% while Wipro & Tech Mahindra have corrected over 45%.

A fall of this extent in fundamentally strong stocks begs the question - are the fastest growing companies or long-term stocks stories over for Indian IT stocks?

In 2020-2021, the best midcap stocks to buy were IT stocks and they have lost their charm by correcting 40-50% from their highs.

What do the charts suggest?

On 19 July 22, I did a video on short-term bottom for the IT index. Watch it here if you missed it: Are IT stocks bottoming out?

The reversal is playing well for the bulls as the index forms a double bottom pattern on the daily chart.

Nifty IT Index

 

The bullish crossover of averages and histogram above integer line on MACD (Moving Average Convergence Divergence) signals the bullish momentum.

The Hurdle

The gap area of 28,500-29,000 along with 50DEMA (Daily Exponential Moving Average) which is placed at 28,653 is acting as hurdle for bulls.

Infosys declared its Q1 results on weekend and the stock opened on a negative note. It is trading around Rs 1,495 at present.

As top investing gurus of India are indicating that fundamentally strong stocks in the IT index are trading at cheaper valuations, investors can dig deep into it to find the best multibagger stock for next 10 years.

Technically, I believe the move above 29,000 in the IT index can trigger a rally towards 31,500-32,000 levels.

A falling rupee may further ignite the reversal.

At present, the rupee is trading at 79.80 against the US dollar.

The Nifty IT index is trading down 0.1% at 28,130. From the index, Coforge and Mphasis are the top gainers today.

If you're interested in being part of my charting journey as I share how to create wealth from profitable trade setups, join my telegram channel - Fast Profits Daily.

Meanwhile, do check out which five stocks stand to gain big from a weakening rupee.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...

Brijesh Bhatia

Brijesh Bhatia Research Analyst and expert chartist, is the editor of Alpha Wave Profits. Fully committed to his craft, Brijesh has mastered the art of making money by trading using technical analysis. Brijesh has an MBA from ICFAI and 16 years of experience in India's financial markets. He began his career on Dalal Street as commodities dealer and it wasn't long before he developed his own unique trading system. Brijesh worked on his trading system until it could be expected to deliver 5 units of return for every unit of risk.

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