IT Firms' Valuation Hits 5-Year Low Amid Sell-off by Investors

Top information-technology (IT) services companies continue to lose ground on the bourses as investors turn away from them owing to an earnings slowdown and threat from artificial intelligence.

- Krishna Kant

The combined market capitalization of the country's top five IT firms that are part of the BSE Sensex is down 24 per cent since January and their valuation has slipped to lowest levels in the past five years.

The sector is trading at a discount to the BSE Sensex and trailing the price/earning (P/E) multiple for the first time in the past four years.

The trailing P/E of the top five IT companies has now declined to 22.3 times from 25.5 times at the end of December last year and a record high of 36 times in December 2021.

In comparison, the BSE Sensex is up 2.2 per cent since the end of last year. The index closed at 79,858 on Friday, up from 78,139 at the end of December.

Index valuation remained range-bound in the past three years unlike the valuation of IT services companies.

The combined market capitalization of Tata Consultancy Services (TCS), Infosys, Wipro, HCL Technologies, and Tech Mahindra declined to ₹24.86 trillion on Friday from ₹32.67 trillion at the end of December.