IT Sector – The safest bet in these expensive times

Inflation has again started raising its head causing concerns of sustainability of the Economic Growth going ahead. The Bull Run so far in India has been led mainly by domestic consumption theme – automobiles, banks etc. With rising prices, disposable incomes are likely to start shrinking thereby causing the growth in many sectors to start slowing down. Even the international stability is something which is shaky and hence sectors like metals and oil and gas can also find the going tough. In this scenario IT sector stands out as not only a safe but a lucrative investment option. In this sector both the domestic and the international demand scenario look promising. In fact the restructuring of operations of Institutions in the developed world will require increased demand for software outsourcing. Even if the full recovery takes time to stabilise in the western world, demand for software and systems are likely to remain robust. Also the moment risk appetite starts waning there will be a flight to safety in the international markets. Dollar will become stronger in this scenario which will pull money out from most emerging markets including India. However strengthening of dollar will increase profitability of IT companies which will act as a good defensive play whenever the markets correct.

Therefore on all declines investors should buy Infosys, TCS, Wipro and strong mid caps like Mphasis, Mastek and Tata Elxsi.