What's Wrong with IT??

chaitanyagoa

Well-Known Member
#1
Hey,

what is wrong with the IT sector guys??? I understand the rupee appreciation having a beating on the IT sector.... But how far can this GO?

Also, How to trade in such scenarios? All comments will be appreciated...:thumb:
 

AW10

Well-Known Member
#2
People are talking about Rs appreciation against $ to 42 level. So certainly it is -ive not just for IT but for all exports oriented companies.
I am sure, smart IT comapnies have the people who understand how to hedge their earnings.. But also surprised that company like HCL keep coming out every quarter to say that they lost money in hedging.

If they are going down then don't forget to check that they are going down in the timeframe that u are interested in. If answer is yes, then short them.. use all bearish strategies and make fast money.

It could be just that people are booking profit on IT after above mkt return in last 1 month.

Happy Trading
 

SwingKing

Well-Known Member
#3
There is another way to look at this. IT has largely led the market's to good gains. Usually when leaders begin to correct, rest follow. This means, if IT really led the market's to rally (which it did), and is finally correcting now, it could be that the main index could follow. Basically it acts like a contrarian indicator. Whether it will materialize or not, that only time will tell.

Tc.
 

AW10

Well-Known Member
#4
Raunak, you are right if we have other sectors following it on way down.
Otherwise, it could also be just sector rotation in bull market. Where outperforming sector corrects and the money moves to relatively other underperforming sector for few days and then again come back to this sector.

But if reversal takes place, then money moves out of equity market and goes into other asset class like bond etc.. not into other sector. Then we might see each sector loosing steam one after another.
IMO, it is difficult to say at this stage whether we are seeing reversal or sector rotation.
(or maybe I don't know how to read it). Any idea about how to find it out.

Happy Trading
 

SwingKing

Well-Known Member
#5
Aw10,

The reason I mentioned this point is because if you look at Bond holding in march, they have gone up to 34.5%. Similarly, exposure in equities especially in emerging market's have seen a drop to 4.5%. Now this is (can) probably indicate investors choosing safer asset class as market's are heading towards 4 quarters gain in a row. Now, historically market's have favored the 4 quarter theory thereby correcting significantly (usually to 38.3% or 50% retracement) in the 5th quarter. Only on 2 occasions has the gain extended to 5th quarter. So let's see how things span out.
 

AW10

Well-Known Member
#6
Hey Raunak, that is really great observation to know. I did not know bond has got so much funds. That clearly supports your views for possible market reversal point.

Intermarket analysis is great topic to understand if one is serious in aligning oneself with big money players.

Lets see what comes next. Quarterly result season is around the corner and that should give enough fuel to keep mkt volatile.

Happy trading
 

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