Pokharna, too, has similar views. "We believe attrition will come down going forward as pent-up attrition following Covid has played out, companies have replenished bench strength through aggressive hiring, and expectations of a demand slowdown will peter out. Also, the wage hike expectation of new hires has started to become more realistic, which is a favourable trend. Headwinds from tight manpower supply will progressively reduce as attrition rates and average premium for lateral hires decline,’’ Pokharna said.
The IT stocks are the biggest laggards year to date, with Infosys declining 24.8 percent, TCS losing 17 percent, Wipro falling 47 percent, HCL dropping 25.55 percent, and Tech Mahindra tumbling 42.59 percent. The BSE IT Index has plunged over 26.39 percent so far this year.
The Nasdaq index, which features a chunk of IT firms, has declined nearly 31.93 percent this year, which is a cause for concern, say analysts. India's benchmark Sensex and Nifty are down just 1.75 percent each.
"Until NASDAQ bottoms out and starts recovering lost ground, there would be a gloomy outlook on the IT sector, even though large-cap Indian IT companies have given healthy future guidance,’’ explained Tapse.
Data shows that the gap is the highest in the case of Infosys with its current one-year forward PE at 22.6 compared to a 10-year average forward PE of 18.63. TCS’s one-year forward PE stands at 25.27 versus a 10-year average forward PE of 21.68.
Similarly, Wipro, HCL Tech, and Tech Mahindra’s current one-year forward PE stand at 16.72, 17.39, and 15.42, respectively, while their 10-year average PE stands at 16.6, 15.41, and 15.28. The BSE IT Index current one-year forward PE is 21.89, versus a 10-year average forward PE of 18.50.
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