FMCG's premium valuation over IT sector likely to shrink, say analysts

Strong growth for the tech sector, margin headwinds for FMCG firms to tilt the scale in favour of the former, say analysts

The IT sector has been one of the standout performers over the past year, with the Nifty IT index more than doubling investor wealth and giving a 102.5 per cent return. The reason investors have been loading up on the IT sector is the revenue visibility it offers. After a gap of about eight years, the sector is expected to get back on the double-digit trajectory in FY22. Besides, the Street is rewarding IT companies on expectations of consistent margin performance, strong free cash flows, and prudent capital allocation.
 
Given that these attributes are typically associated with consumer companies,