In the last few days, there have been trading sessions where all of sudden IT stocks have started to do well. This is coming at a time when there is nothing positive which either companies from the sector have said or there is anything else which can be seen as signs of things changing for better. Is this an first indication that global risk on trade is back on the table. There is enough evidence to show when US interest rates are high, there is a risk off mode globally and tech stocks both in India and globally don’t outperform, rather they at times under perform. As soon as there is an indication that interest rates in the US are likely to come down, the risk on trade tends to make a comeback and tech stocks start to do well globally. But incase of Indian IT stock, there is probability that this risk on trade is helpful but another factor is adjustment of valuations and finally the fact that some money is going to move toward a strong and stable balance sheet.
There are times when even the best of the names on the stock market underperform, not because of anything else but because of the fact that globally the market tends to get into risk off mode. There are two parts to the stock performance, first how the business is doing and second how much the market is “ready to pay” for that business. The second part which is “ready to pay” is in turn dependent on how much desire does the global market have to
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