Recession cloud looms large over IT sector#39;s digital transformation party

Recession cloud looms large over IT sector#39;s digital transformation party

The relatively strong growth guidance given by IT companies for 2022-23 have now come under threat, given the apprehension of the US economy slipping into recession later this year





Mumbai / May 19, 2022 / 12:41 PM IST





From being the engine of a market rally last year, information technology stocks have turned the leaders of market correction this time.

The Nifty IT index entered the bear market territory as with an over-26 percent fall from a record high of 39,446.70 points hit earlier this year. On May 19, the selling pressure on IT stocks continued as the Nifty IT index nosedived nearly 4 percent with individual counters shedding 3-5 percent.

While the early part of the correction was driven by profit-booking by investors on account of high bond yields and shrinking margins, the recent leg of selling has been driven by fears of key geographical markets entering recession over the next few quarters.

In 2021, the Nifty IT index rallied 59 percent driven by strong earnings growth for IT companies that were bagging multi-million-dollar digital transformations deals in the US and Europe.

The relatively strong growth guidance given by IT companies for 2022-23 have now come under threat, given the apprehension of the