CNX IT index at multi-year high; Infosys, TCS, HCL Tech, Wipro at multi-year high

Riken Mehta
Follow me on Twitter @mehtariken 

IT stocks have been one of the biggest wealth creators for investors over the years. CNX IT index, barometer of IT stocks has recorded fresh highs since 2004. The index has gained 211 percent in last nine years while rupee has depreciated 40 percent in the same period. Heavyweights like Infosys, HCL Tech, TCS and Wipro are trading at multi-year highs as strong US economy coupled with weak rupee favours IT stocks.

N Chandrasekaran, CEO and managing director of India's largest IT software company TCS also painted bullish picture for FY15. “FY15 will be a better than FY14 as per the initial talks that we have had with our clients. We expect a good growth overall -- retail, consumer goods and services, utilities, pharma, financial services, etc," N Chandrasekaran told reporters.

 

How to trade when rupee falls: Long IT, Short Nifty, Bank Nifty

Riken Mehta 

moneycontrol.com

Follow me on Twitter @mehtariken 

Major asset classes like equities, currencies, commodities and bonds have seen huge volatility in the last six months on speculation over the pace of the US Fed’s bond purchases. Fears of a reduction in monetary stimulus have been putting pressure on the rupee and equities. However, some traders have used these sharp moves to their advantage. One such strategy has been to go long on IT stocks and short the Nifty and Bank Nifty stocks.

In past six months, every time the rupee has depreciated more than three percent, Nifty has lost two percent while Bank Nifty has shed close to four percent in trade. Barring one instance, CNX IT has given positive returns.

Instances when rupee has fallen more than 3% in short duration (3-8 days) Period: 11-May-2013-12 Nov-2013. Rupee data source: Bloomberg

Days	Rupee	NIFTY	BANK NIFTY	CNX IT
June 5-11 (5 days)	-3.45%	-2.21%	-3.71%	0.54%
Jun 17-26 (8 days)	-5.58%	-3.79%	-7.18%	0.13%
Jul 29-Aug 2 (5 days)	-3.47%	-2.67%	-4.47%	2.54%
Aug 14-22 (6 days)	-5.60%	-5.11%	-7.18%	-2.49%
Aug 26-28 (3 days)	-8.63%	-3.40%	-7.50%	3.57%
Nov 5-12 (6 days)	-3.20%	-4.73%	-8.88%	1.03%