With earnings season coming up, what does Nifty IT has to offer?

Nifty IT has fallen about 37% from its lifetime high levels of nearly 40,000.

The global market meltdown that was primarily caused by soaring inflation, proved detrimental to the growth sector like IT. The “wage war” that most IT companies faced, led to a rise in their attrition rates and attrition rates were found to be at multi-year highs. Most of the overvalued growth IT stocks were subsequently hammered down, and the index has found its place at nearly 26000-levels. In general, the selloff is so tragic, that the index is now seeing itself below its 200-DMA by about 17%.

Nifty IT has fallen about 37% from its lifetime high levels of nearly 40,000. From there, the avalanche struck the index, and IT stocks saw a free fall. Most of the midcap growth stocks fell as much as 40% from their lifetime highs. Even in the past few weeks when the broader market saw a good bounce from their oversold regions, Nifty IT index was unable to gain momentum. That being said, the index certainly has dark clouds over it.

On the technical chart, all the key moving averages of the index are in a downtrend, while the momentum oscillators are sideways to bearish. The +DMI is below the -DMI, indicating a stronger downtrend. So it’s logical to think about what might change the course of this sinking ship?

Well, TCS is set to declare its Q1FY23 results on July 8. It is one of the top largecap IT company in India and is a heavyweight in the index. Earnings growth, and attrition rate, along with management commentary, shall be the key to determining the changes that have taken place in the sector. With most of the IT business coming from the US, the overseas economic slowdown shall be in focus.

In case of better-than-expected results of top IT companies, the index can rally towards the level of 30500, which was its prior swing high. A rise above this level can boost investors’ sentiment and Nifty IT can see good moves from there on. However, in any case, a fall below its 20-DMA level of 27800 shall continue its bearish trend, which can also test sub - 26000 levels. The upcoming days are crucial for the sector and keep an eye on the above levels to understand the trend of the index.