IT index at decisive levels, so go stock-specific

The IT index witnessed its third consecutive downward tick on Friday from the peak levels, possibly on account of profit-booking. The index consolidated at higher levels, which was followed by correction for three days. However, the index bounced back from the trendline support level and closed just below the open-high level.

HCL Technologies, which holds 17.3 per cent weightage in the Nifty IT index, plunged as much as 16 per cent despite posting Q4FY18 results in line with expectations. Also, Tech Mahindra, Wipro and Mindtree, which hold 12.4 per cent, 9. per cent and 3.5 per cent weightage, respectively, too nosedived during the week either in the wake of results or in step with other IT stocks.

Coming back to the IT index, it had formed a kind of double bottom on the daily time frame at 12,230-12,280, and thereby it has formed a cup-shaped base. It gave a pattern neckline breakout at 13,370. The index hit a peak of 14,294 and witnessed a pullback up to the neckline level on Friday. The bounce back on Friday may lead to further bounce back in the index in the coming sessions. However, on the weekly time frame, the index confirmed a shooting star pattern with a fall in the current week. Hence, investors are advised to adopt a wait and watch policy, but they can go stock-specific in the IT index as few stocks have continued in consolidation mode, despite the fall in the index.