Markets fall, time to buy IT stocks?
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After a minor win, is the stock market crashing again?
Not really.
This small setback is due to the news of US FED hiking the interest rates, yet again. But this HAS ALREADY been factored in the stock markets.
So what did I do today?
I bought some IT stocks 🙂
Watch the video till the end to know which stocks I bought!
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Video Editor: Vallabh SalgaonkarHi everyone welcome to today’s video, so a lot of you might be panicking that you know what Market fell well, like two and a half percent. What am I
supposed to do? Am I supposed to sell all my stock this that? Okay, so I thought that I’ll shoot a very quick market update and then we will move on
to the main video. So what is the reason for the market Fall? There are two theories here, so the first key theory is that in the US there are talks
that the interest rate will be jacked up fairly quickly and it will hit somewhere around four and a half percent interest rate. So, as a result, the
liquidity will come down and the markets will fall, so this news has already been factored in. So please do not sell your stocks in case you feel that
the interest rates are going to go up in case
The second key reason which, according to me, is a more prominent reason, is that the markets recently broke the 18 000 level, and I will put the
chart here and you can see that they recently gave a breakout above 18 000 level. That was a very important psychological level, but the markets could
not sustain at that level so, which means that there was profit booking that was done at this level and whenever little bit of profit booking comes,
the market can fall by four or five percent. You should not stress too much. What did I do today in the market? I bought I
So let’s move on to the main video hi. Everyone welcome to today’s video. So let me start today’s video by showing you this particular chart for
Nifty 50.. What you will notice is that, from its top nifty 50 right now is trading at a discount of 3.5, so the recovery for nifty, 50 or the Indian
index is almost complete
So I will help you understand the entire backdrop of the story that why it stocks are falling. What are some of the best it stocks that you can
purchase? I will do technical business and fundamental analysis of three of the it stocks. So let me answer the first critical question that why it
stocks have fallen so much what has been the primary reason for the fault now, if you go read the commentary, you will find variety of answers here,
but my answer is fairly simple: that it stocks in India are falling because the U.S market is falling
Let me present some data to back this point up and let me show you several pieces of data. So here is the first piece of data, and this shows a
correlation between Dow Jones, which is the US index and sensex, which is the Indian index. And if you consider like a three year time frame – and if
you keep on aggregating all these numbers, you will approximately get the same results. Yes, there will be times, for example, let’s pick 2011 that
Dow Jones gave a slightly positive result, but the Indian markets – they fell quite a lot, but the Indian markets next year they recovered quite a lot
and DOW Jones hardly moved
The story I’m trying to tell you is that number one from an index point of view. Also there is a very strong correlation between U.S markets and
Indian markets. There is a study that was done and it categorically pointed out that the correlation between the Indian market and the U
Now this Theory can be also tested out at an individual stock level. So let us pick two giant stocks, so let’s pick Amazon from the US and TCS from
India and let’s see if their prices have somewhat of a correlation. So let’s go to Amazon’s chart here and if we look at one month data it has fallen
by 10.22. What about TCS so again, one month data, eight point: four five percent, so almost similar. What about six month chart so six month, TCS has
fallen 15 and what about Amazon Amazon again around 13, almost similar figure? What about one year, data 26? What about TCS one year result? It is 20,
so the story is very very clear that the Indian giant tech stocks – they depend a lot, a lot on the U
How much exactly so you can pause the video and read through this particular graphic. This is a fairly interesting graphic. Let me throw out some
numbers there and it outlines the dependency of the it sector on the U.S market
They have enjoyed a lot of business from the US up to the tune of 50 billion dollars American ID surveys. It depends and hires a lot of people. What
not! And if you just go through these points, you will see the extensive dependency of the Indian ID Giants on the U.S market
S markets have deeply deeply underperformed and, as a result, even the Indian ID stocks, they have deeply underperformed. So now this is a very
insightful finding and if you find this information to be useful, do press the like button. It will help these type of videos reach out to more people
and they can also make better returns with their portfolio. So the insightful piece of information is simply this that many of us are waiting right
now that you know what should I be investing in ID stocks, not investing in I
That is the recovery in the U.S markets going to happen or not. If the answer to that equation seems like a yes, it might be a great time for you to
go and invest in Indian ID stocks. Also, and probably in case, you are considering investing in the U
On that note, you can check some of my best or best picks in the U.S stocks on vested, and I am putting those links on the description box. You can
use reset to do U.S Stock Investing
S market. That’S one second key point that these stocks are going to recover when the U.S market starts recovering and third important point is that
have the U.S Markets started to recover the answer there is yes, it has just started to recover and let me prove that case to You so recently you
might have read the news that the U
S market corrected quite a bit. What was this day? This was again the day that, when the U.S feds made the announcement, or they were on the verge of
making the announcement that hey, we are going to jack up the interest rate. Now you tell me in the comment box at how many times you have heard this
commentary, that the U
This has been happening for the last six eight months. Then the markets corrected a bit and they started recovering during the day itself towards the
day’s end and the very next day the market somewhat started, consolidating and going up. More importantly, the markets did not go down even with this
announcement. What does that indicate? So this simply indicates that, right now there is no new news in terms of the U
It’S always the interest rate issue that is being cropped up over and over again, and even this news is getting very old and it has been factored
into the market as of now, and this can be back tested that if you go back six months, you will See that the total fall has been only nine and a half
percent. This is not that massive of all as people are making it to be. So my hypothesis is that the US markets have started to recover and, as a
result, even the I.T stocks will be on the verge of recovery
S market undervalued right now, because you can substitute one for the other so to say so. Let me present some data here. So first key data point
comes from Morningstar, where they have done an assessment, whether the U.S stock market right now is it overvalued or undervalued
If you see a data point less than one, it means that the markets are undervalued. This is what the study is telling us. So you can see that whether
you go to Mid cap, small cap or large cap in the U.S stock markets, the market has started to become undervalued
This is what the data tells us from Morningstar. So, even if you go sector Viewpoint again, you will find very similar data. For example, if you go
and analyze, where is Tech, so you will see 0.9, it means that the market in Tech or the tech oriented stocks in the US, even they are undervalued.
Again
S market right now is undervalued. It is definitely not overvalued. Even the tech in the U.S seems to be undervalued as of now, so how does that data
reflect back in India so again, very quickly? Let us go to this chart and you can categorically see that right now that Nifty it index is trading at a
discount of 27. That’S part, one part two
The Nifty had touched this part earlier and had bounced back, so this seems like a very, very strong support, which is unlikely to be broken, so the
risk reward equation of investing in I.T stocks right now seems fairly positive. So this brings us to the final question that okay great agreed to the
argument that hey it stocks are going to make a bounce back. But how do I make money? Which stock should I consider investing in okay? So while I
cannot dissect every single it stock that is there in India, let me analyze three different types of stocks
I will just paint the entire picture, and you tell me in the comment box which of these stocks you will be investing and or avoiding. So let us kick
start that conversation and let us first talk about about TCS. So let me first show you the technical Viewpoint of TCS, so TCS right now is trading at
a discount of roughly 20 22 from its stock, so there is a healthy margin of safety. Second key point that it is trading at a very strong support zone
It is unlikely that unless the entire Market falls down, something like TCS is going to come down below this point. So this is the second critical
point. Third critical point is the support that you see here. So this is the third layer of strong support
Now, if you do a fundamental analysis, you yourself will be able to figure out and say it with confidence that something like PCS. It is highly
unlikely that it will fall by 50. From this point. Yes, it can fall by another 4, 5 percent. All that stuff can happen that can happen with any stock,
but a 50 fall, which is what the technical Target tells us
There has been no issues and have the profits been rising, so, yes, the profits have also been rising. There has been no issues, third, key point –
that are there any expansions plans underway. This is a very interesting question, because a company like PCS it can stagnate right and for years it
might not generate or give any results. So therefore, it is very important to understand how these tech companies are going to grow next and are they
investing their money in growth, so easy way to figure? That out is that go to the balance sheet
Maybe they are investing a big part of that money in research and development and whatnot. So this is definitely a healthy sign and it’s not as if
that they have just invested the money. Now they have increased their fixed capacity and they will start seeing positive results from next quarter.
No, it takes time, so maybe it will take one or two years so whatever investment TCS has made here, probably it will start generating results now, so
TCS seems to have done a lot of tayari in order to expand its growth over the next half a decade
So this is a very important snippet from Mr gopinath, who is the CEO and MD of TCS. So in his interview he said a lot of things, you can pause and
read it. Basically, what I got out of the interview was that TCS right now, it focuses a lot in terms of cost cutting for helping its client cut cost.
What TCS is going to do next is that they will help their clients in order to generate more revenues
Now anyone can make tall claims that hey we are running this type of company, that type of company come and invest with us. No, you need to do your
own analysis, and this chart here is very very interesting. It shows that client breakup of TCS and what you will notice is that it has approximately
44 of client, which is generate more than a million dollar in Revenue. Now, why is this data point important? This data point is important because the
front-end Consulting Services, who will procure those Services if you have got rich clients in your kitty
So, for example, as a business has a lot of trading accounts and they can understand which of their clients, our hni’s non-agnis, Etc. They probably
have that entire database, I’m just using this as an example as an educational purpose, so they have access to a lot of hnis tomorrow. If they decide
to start an EMC business or a hedge fund, will they be able to figure out lines? The answer is yes, they will be able to do it same. Is their story
here that TCS already has access to a lot of rich clients, and this is one of the winning modes for TCS compared to any other IIT company in India,
that they have access to a lot of rich clients and if they want to move From back end Consulting to front-end Consulting, they can do it or they will
have better chances of executing that plan
So if Nifty it has to go up, then Infosys also needs to go up. So Infosys seems like a safer play from that particular perspective. But let me break
apart and talk about a few more interesting points about Infosys. So first key point is that Infosys and TCS business model right now is not very very
different
Of course, there are minor differences that which geography they are serving, etc, etc, but to cut the long story short, both companies try to
approach almost similar type of clients. Second key point: one primary difference between Infosys and tcss that for Infosys, almost 62 percent of the
business that they get is exclusively from North America. This number is slightly lower for TCS. This is the second key point that you need to
remember and third, and the most critical point is about the run
If you go back to tcss chart and if you take a look at the run-up that had happened for TCS from the bottom at 2020, the total run-up was
approximately 146, but what about Infosys? So if you do the same exercise, what you will notice is that its run up was approximately 256 percent so
which one is a better buy or a more value buy. You can, let me know in the comment box. Well, this is one critical difference. Now you might have a
natural question that okay accept that maybe Infosys is running some type of plans that can help it generate massive amount of growth
So here is the balance sheet for Infosys, and you will see that the fixed asset that they have invested in, they also started expanding their
business quite aggressively post 2020 and commanded slightly richer valuation compared to TCS. So, according to me right now, the risk reward equation
for TCS is slightly better compared to Infosys. I’M not trying to say that Infosys is a bad stop. It is a wonderful stock if the entire Nifty it index
in India goes up
The third stock that I want to quickly touch upon is buying the tree and let me first and foremost walk you through the fundamentals of the company
and then I will quickly comment on the technicals. So if you take a look at the sales, the sales have grown over the last few years, it has been
generating decent amount of sales. Even this is translating into profit, which is very good news, and on top of that they are expanding their
capacity, so they have been making investments in terms of increasing their capacity. But the problem is that this capacity increase, which has come
after 2020 – it is not at the same rate as it is for Infosys and TCS
This seems a little bit high for me now, of course, a lot of counter arguments can be made that a mandatory is a smaller company. It can grow faster.
So probably the PE expansion needs to be. There agreed
They are trying to become the next TCS Infosys. Will they win that game? Will they not win that game that remains to be seen, but as of now, if I
have to go and make safe returns, then I will go with something like PCS. If I want to just swing the Nifty at this juncture, then probably buying
something like mandatory. Might also be okay, but in that scenario I would rather take a bet on entire Nifty, it discounting TCS and Infosys
Even a better way would be that I will simply go and take a little bit of lower exposure in the U.S markets. So so this is the combination that I’m
looking at. I hope you enjoyed the video and, as per your risk appetite, you will do the investing do press the like button, and I will see you soon
.
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