Digitisation trend makes IT a sound long-term bet, but stay cautious

After the recent rally, direct investors need to be cautious about valuations

Information technology (IT) sector funds have witnessed a category average return of 17.6 per cent over the past month and 31.2 per cent over the past three months. The S&P BSE IT Index, too, is up 23.45 per cent and 36.46 per cent over these periods.  

Several factors have contributed to this rally. IT companies had begun to turn optimistic in their commentary from April. They expected the impact on first-quarter (Q1) earnings to be harsh, but were confident that things would stabilise thereafter.

“In Q1 results, while the revenue figures were in line with or slightly better than expected, there were