Will Buying-the-Dip Work for IT Stocks?

Historically, Indian IT stocks have delivered strong returns when bought during periods of extreme pessimism

- Abhishek Mukherjee

The name Lewis 'Chesty' Puller might draw blank stares in this part of the world, but for millions of military men in the West, it commands instant respect. Puller is the most decorated Marine in US history, with five Navy Crosses and one Distinguished Service Cross to his name for gallantry and heroism in the line of duty.

A colorful veteran of World War II, he also served in US military campaigns in Korea, Nicaragua and Haiti. A famous incident during the Korean War offered a glimpse into his mode of thinking.

One day, in the midst of battle, a breathless soldier ran up to him with some grim news. "Sir, we're surrounded by enemy soldiers from all sides!"

Puller's eyes lit up instantaneously. "Good," he replied, "This makes it the perfect time to go on the offensive, because now we can shoot in any direction."

This mindset of seeing opportunity where others see only danger is a hallmark not just of great military leaders but also outstanding investors.

The most successful investors, both globally and in India, have made their fortunes not when times were good, but when fear was at its peak and their backs were against the wall.

'Buy the dip' is a well-worn investing maxim. It is also the hardest thing to do in practice. Just ask the millions of investors in India's embattled IT sector.

Peak Pessimism

To say that India's $280-billion IT industry is facing trouble would be flirting shamelessly with understatement.

Global macroeconomic headwinds, tariff-induced uncertainties in multiple sectors, delayed decision-making by clients and subdued discretionary tech spends across geographies have coalesced into the roughest seas the industry has faced in recent years.

Adding to this is the tidal wave of generative artificial intelligence (GenAI), which threatens to wash away the entire business model the IT services outsourcing industry has been built on.