Is It Time to Buy IT ? Fund Managers Suggest Gradual Addition by Investors

Why It Matters

The valuation gap creates a potential upside for value‑oriented investors, while a gradual accumulation mitigates timing risk amid lingering AI and geopolitical concerns. A rebound in Indian IT could boost broader market performance given the sector’s historical contribution to growth.

Key Takeaways

• Nifty IT PE 20.6, lowest since July 2020.
• Index down 31.5% since Oct 2024 vs Nifty 13.4%.
• IT sector weight fell to 8.85%, down from 19.8% peak.
• Dividend yield 3.5%, earnings yield 5% offer value.
• Managers advise lump‑sum now, SIP over two years.

Pulse Analysis

6‑times price‑to‑earnings multiple – the lowest level since the post‑COVID slump of July 2020. 4% drop. \n\nDespite the bearish backdrop, fund managers highlight several positive catalysts.

5% dividend yield and a 5% earnings yield provide attractive cash‑flow characteristics, while deal momentum is picking up as global enterprises seek digital transformation partners. The rise of artificial intelligence, though initially perceived as a threat, is being reframed as a structural tailwind that expands the total addressable market for Indian software services. \n\nFor investors, the recommended approach blends immediate exposure with disciplined, staggered purchases over the next two years.

A lump‑sum allocation leverages the current discount, while systematic investment plans (SIPs) smooth volatility and reduce timing risk. This hybrid strategy aligns with the sector’s long‑term growth narrative and mitigates concerns around AI disruption and geopolitical uncertainty. Should the sector regain momentum, its rebound would likely lift the broader market, given IT’s outsized contribution to India’s export earnings and GDP growth.